MBS MID-DAY: In Stunning Turn of Events, Economic Data Still Doesn't Matter

By: Matthew Graham •

Right there in the title of the first commentary of the day: "more economic data that probably won't matter."  There's always some small tinge of doubt in my mind before I preemptively dismiss the importance of things that have historically been important.  That's probably why I qualified it with the "probably."  But now we see that was probably unnecessary.  Probably.

Who knows how markets might have reacted if this morning's wage/spending data had been much farther from expectations?  Considering that this morning's batch of economic data would certainly have been a market mover at most other moments in market history, the fact that it was completely overlooked says a lot about the current environment.

Some market-watchers out there may even be a bit confused as to why Treasuries and MBS IMPROVED after STRONGER-than-expected Chicago PMI and Consumer Sentiment at 9:45 and 9:55am respectively.  Traditional approaches don't really offer a great way to account for that.  In today's case, there happened to be headlines and a speech from Britain's Prime Minister concerning a "severe" terrorism alert.  UK bond markets led the charge toward lower yields into 10am and everything has leveled off rather uneventfully since then.  Net/net, 10yr yields are perfectly unchanged and MBS are up 3 ticks (Fannie 3.5s).

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
99-18 : +0-03
FNMA 3.5
102-31 : +0-02
FNMA 4.0
105-31 : +0-02
Treasuries
2 YR
0.4880 : -0.0160
10 YR
2.3380 : +0.0040
30 YR
3.0740 : +0.0030
Pricing as of 8/29/14 12:22PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:13AM  :  Bond Markets Still Not Listening to Econ Data
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matt Hodges  :  "401k loan, gift to husband"
Aaron Denton  :  "I hardly ever use Feddie but had a recent deal that would run FAnnie - In a situation where my genius borrower went and blew about $7k on furniture out of his asset reserves prior to closing - Loan now running refer in LP - His wife is not on the loan due to credit issues (birds of a feather) she does however have $12k in a retirement account that would get our reserve levels back in line with our approval. Not being familiar with Freddie guides can anyone give me a pointer in the best way to accomplish this?"
Ted Rood  :  "Let's hope positive econ data continues to not matter."
Matthew Graham  :  " THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT FINAL AUGUST 82.5 (CONSENSUS 80.1) VS PRELIMINARY AUGUST 79.2 AND FINAL JULY 81.8"
Ted Rood  :  "A whopping 4 reprices all week per the summary. Secondary Desks must have been very busy in the afternoons,"
Matthew Graham  :  "RTRS- CHICAGO PURCHASING MANAGEMENT INDEX HIGHEST SINCE MAY"
Matthew Graham  :  "RTRS- CHICAGO PURCHASING MANAGEMENT INDEX 64.3 IN AUG (CONSENSUS 56.0) VS 52.6 IN JULY"
Victor Burek  :  "wow...very optimistic in Chicago"
Matt Hodges  :  "i wouldn't expect much today, AP. it's friday before long holiday weekend"
Andy Pada, Jr.  :  "seems pretty bond friendly"
Matthew Graham  :  "RTRS - US JULY PERSONAL INCOME +0.2 PCT, WEAKEST READING SINCE DEC 2013 (CONS +0.3 PCT) VS JUNE +0.5 PCT (PREV +0.4 PCT)"
Matthew Graham  :  "RTRS- US JULY PERSONAL SPENDING -0.1 PCT (CONSENSUS +0.2 PCT) VS JUNE +0.4 PCT (PREV +0.4 PCT)"
John Tassios  :  "The PCE will have some bearing MG, that is important for the long end"