MBS MID-DAY: Bond Markets Holding Decent Gains

MBS Pricing Snapshot

Some lenders who released rates early enough today may already be in a position to reprice as MBS are up at least a quarter of a point since then. Much of the improvement arrived after the stock market opened though the 10am NAHB data helped the gains extend.

Fannie 3.5s are now up 12 ticks on the day (.375) to 101-27. 10yr yields are down just under 3bps at 2.678. For MBS, this is 3 ticks away from the levels seen just before Nov 8th's NFP. Treasuries have farther to go, but even so, haven't seen current levels since the same NFP morning.

- NAHB HMI 54.0 vs 55.0 forecast, 54.0 previously
- Current single-fam home sales 58 vs 58 previously
- Prospective Buyer index 42 vs 43 previously
- 6-mo outlook 60 vs 61 previosly
- Market Reaction: Bond markets moved noticeably higher in price following this data. While it was technically unchanged from last month, that figure was revised lower. It also missed the consensus by a point. That normally wouldn't matter much but this index has been incessantly bullish, so a turn in the other direction stands out a bit.

Builder confidence in the market for newly built, single-family homes was unchanged in November from a downwardly revised level of 54 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. This means that for the sixth consecutive month, more builders have viewed market conditions as good than poor.

“Given the current interest rate and pricing environment, consumers continue to show interest in purchasing new homes, but are holding back because Congress keeps pushing critical decisions on budget, tax and government spending issues down the road,” said NAHB Chairman Rick Judson. “Meanwhile, builders continue to face challenges related to rising construction costs and low appraisals.”

“Policy and economic uncertainty is undermining consumer confidence,” said NAHB Chief Economist David Crowe. “The fact that builder confidence remains above 50 is an encouraging sign, considering the unresolved debt and federal budget issues cause builders and consumers to remain on the sideline.”

The overnight session was nothing spectacular in terms of volume or volatility. Treasury yields moved slightly higher during Asian hours as China provided more detail on reform plans.

10yr yields drifted as high as 2.72 before moving back to the other side of Friday's trading range. Treasuries and MBS both came into the domestic session near unchanged levels and have improved somewhat into the first hour.

10's are currently just under a bp lower at 2.698 and Fannie 3.5s are 2 ticks higher at 101-17. The only economic data on the calendar this morning is the NAHB Housing Market index at 10am.