MBS MID-DAY: Uneventfully Narrow Holiday Range

By: Matthew Graham •
MBS Live: MBS Morning Market Summary

The overnight session was tame for Treasuries, ultimately resulting in opening levels just slightly weaker than Friday's latest.  That said, both Treasuries and MBS began the day well inside Friday afternoon's "drifty" ranges (103-05 to 103-10 in Fannie 4.0s and 2.92 to 2.90 in 10yr yields).

Prices improved following this morning's Incomes and Outlays data, but considering the data suggested more consumer spending for a smaller-than-expected amount of income, we shouldn't assume the data was the motivation. 

Consumer Sentiment was out at 9:55am and just slightly weaker than expected.  It, too, failed to produce any noticeable market movement.  As such, we continue another mid-day drifting uneventfully.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
95-16 : -0-01
FNMA 3.5
99-24 : -0-04
FNMA 4.0
103-07 : -0-03
FNMA 4.5
106-02 : -0-04
GNMA 3.0
97-01 : -0-01
GNMA 3.5
101-06 : -0-03
GNMA 4.0
104-06 : -0-02
GNMA 4.5
106-28 : -0-04
FHLMC 3.0
95-09 : -0-01
FHLMC 3.5
99-19 : -0-03
FHLMC 4.0
102-30 : -0-04
FHLMC 4.5
105-28 : -0-05
Pricing as of 11:08 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this morning.
10:45AM  :  ECON: Consumer Sentiment Slightly Weaker Than Expected

- Sentiment 82.5 vs 83.0 forecast
- Current Conditions 98.6 vs 98.1 forecast
- Market Reaction: none

Consumer sentiment rose to its strongest in five months in December as Americans' outlook on the economy and job prospects improved, a survey released on Monday showed.

The final reading on the Thomson Reuters/University of Michigan's overall index of consumer sentiment jumped to 82.5 for December, up from the 75.1 posted in November but unchanged from the preliminary reading released earlier this month.

This was the highest reading for the index since July, though it was slightly under expectations for a reading of 83.

"Most of the gain was due to more favorable buying plans due to renewed discounting as well as more favorable short-term prospects for the economy," survey director Richard Curtin wrote in a statement.

-Reuters

9:15AM  :  Bond Markets Slightly Weaker Amid Quiet Conditions
As is typical for the holiday-shortened week, trading activity is subdued and thankfully, so is volatility. Treasuries settled into a range overnight with yields just above Friday's latest levels. 10's hovered around 2.90 until moving to 2.92 just after 8am.

Fannie 4.0s opened 7 ticks lower at 103-03, but both MBS and Treasuries improved after the 8:30am economic data (though not necessarily because of it). 10's returned to their overnight range, currently up 2bps on the day at 0.0184 and Fannie 4.0s are down 1 tick at 103-09.

The only other scheduled data this morning is Consumer Sentiment at 9:55am. It's not likely to cause significant market movement, but it can cause some if it's far enough away from the 83.0 forecast.
8:43AM  :  ECON: Spending Hits Expectations While Incomes Decelerate
- Consumer Spending +0.5 vs +0.5 forecast
- Income +0.2 vs +0.5 forecast
- Annual Core PCE Prices +1.1 vs +1.1 previously
- Market Reacion: MBS and Treasuries improved almost imperceptibly, but it wasn't clearly a result of the data.

Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $62.6 billion in November, compared with an increase of $43.9 billion in October. PCE increased $63.0 billion, compared with an increase of $44.2 billion.

Personal income increased $30.1 billion, or 0.2 percent, and disposable personal income (DPI) increased $16.2 billion, or 0.1 percent in November according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $63.0 billion, or 0.5 percent. In October, personal income decreased $11.7 billion, or 0.1 percent, DPI decreased $25.6 billion, or 0.2 percent, and PCE increased $44.2 billion, or 0.4 percent, based on revised estimates.
Morning News Headlines
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.
Matthew Graham: 8:30AM
RTRS- US NOV PERSONAL SPENDING +0.5 PCT (CONSENSUS +0.5 PCT) VS OCT +0.4 PCT (PREV +0.3 PCT)
Matthew Graham: 8:31AM
RTRS- US NOV PERSONAL INCOME +0.2 PCT (CONS +0.5 PCT) VS OCT -0.1 PCT (PREV -0.1 PCT)
Matthew Graham: 8:31AM
RTRS- US NOV CORE PCE PRICE INDEX +0.1 PCT (+0.1016; CONS +0.1 PCT) VS OCT +0.1 PCT (PREV +0.1 PCT)
Matt Hodges: 9:54AM
odd ball question - conventional deal on a VA FC... appraiser states lead based peeling paint all over the place. Safety issue, much like broken window, broken HVAC, subflooring?
Matthew Graham: 9:55AM
THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT FINAL DECEMBER 82.5 (CONSENSUS 83.0) VS PRELIMINARY DEC 82.5
Jason York: 10:10AM
Hodge, I don't know that that would be an issue on conventional, at least not for your deal, for the customer, that's a different story, but this is just a guess

Nathan Miller: 10:13AM
MH I had that come up on a conv. deal...UW req. 442 conf. all loose paint areas were scraped off/repaired and the house was repainted by licensed/bonded/ins. painting contractor. the customer got a few quotes on the work in the $5K+ range and disappeared after that.

Jason Anker: 10:37AM
way to go Mel Watt & MBA Evidence that our lobby does work
Andy Pada, Jr.: 10:40AM
MG is too humble, but we should be thanking him for his part in putting the LLPA issue on the forefront. Raise a glass to MG.

Justin Harward: 11:16AM
Is it just me, or shouldn't MBS rally on Watt's news on Friday?
Matthew Graham: 11:53AM
JH, what's your thought as to why would MBS rally on that news? My thought is that If we're talking about increasing the fees that GSEs collect to account for risk, and then those fees are suddenly not going higher, than the implication (albeit inconsequentially small) is for higher risk and lower prices from a pure MBS standpoint.
Learn More about Market Discussion on MBS Live
Read what our user's have to say about MBS Live on LinkedIn.
» Start a two week free trial of MBS Live.