MBS MID-DAY: Bouncing Back From Data-Driven Weakness

By: Matthew Graham

Much like yesterday, today's economic data was far enough from consensus to move markets.  Unlike yesterday, the movement was in an unfriendly direction after Housing Starts came in at the best levels since late 2007.  There were weaker aspects to the report (like a big slide in Building Permits), but those were mostly chalked up to volatility in multi-family construction, thus having less of an impact.

In both cases (today and yesterday), a major caveat is in order.  Namely, volume and liquidity remain light.  Markets are either waiting for tomorrow's FOMC Minutes, or they're just generally tuned out as the summer vacation window closes.   In the meantime, lighter volume/liquidity means it takes fewer trades to move trading levels.  Simply put, bond markets look like they care more than they otherwise would.  Even then, today's range has been well-within the recent range--another vote for pre-FOMC consolidation.

Despite the initial weakness, bonds found support at the 9:30am NYSE open.  This looks like it's mostly a factor of late European trading where sellers were flushed out in the run up to 9:30am.  Since then, we've been gradually improving with MBS just now making it back to 'unchanged' on the day.


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
100-09 : -0-01
FNMA 3.5
103-15 : -0-01
FNMA 4.0
106-02 : -0-01
Treasuries
2 YR
0.7180 : +0.0080
10 YR
2.1840 : +0.0140
30 YR
2.8400 : +0.0200
Pricing as of 8/18/15 12:24PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
8:52AM  :  Bond Markets Weaker After Highest Housing Starts Since 2007

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "The impact is already seen in the trading levels since 8:30am. The data is early enough that most any lender will have seen the weaker prices before initial rate sheets. Thus, no reprice risk. "
Rob Talia  :  "the stats for building seem to be taken in a positive light although its still not where they would like it to be... is the positive data (although still weak) going to impact the market negatovely for interest rates?"
Rob Talia  :  "wondering what everybodys thoughts are on reprices today? "
Matthew Graham  :  "RTRS- US JULY HOUSING PERMITS 1.119 MLN UNIT RATE (CONSENSUS 1.232 MLN) VS JUNE 1.337 MLN UNIT RATE (PREV 1.337 MLN)"
Matthew Graham  :  "RTRS- US JULY HOUSING STARTS 1.206 MLN UNIT RATE (CONSENSUS 1.190 MLN) VS JUNE 1.204 MLN UNIT RATE (PREV 1.174 MLN)"