MBS MORNING: RATES BETTER
Mortgages are moving down in coupon as the yield curve flattens...rates are lower today.
10am Marks (since 3pm Close)...
FN30_________________________
FN 4.5 -------->>>> +0-06 to 101-03 from 100-29
FN 5.0 -------->>>> +0-04 to 102-00 from 101-27
FN 5.5 -------->>>> +0-04 to 102-14 from 102-10
FN 6.0 -------->>>> +0-02 to 103-03 from 103-01
GN30______________________
GN 4.5 -------->>>> +0-07 to 101-19 from 101-12
GN 5.0 -------->>>> +0-05 to 102-17 from 102-12
GN 5.5 -------->>>> +0-03 to 102-27 from 102-24
GN 6.0 -------->>>> +0-00 to 103-09 from 103-09
Today should be entertaining. The CEOs of Goldman Sachs, JP Morgan, Bank of NY Mellon, Bank of America, State Street, Morgan Stanley, Citigroup, and Wells Fargo will sit before the US House Financial Services Committee for some "questioning" on what they did with taxpayer money...and by questioning I mean ridiculing, lambasting, jeering, heckling, and interrogating. Should be interesting to say the least (not because I laugh at the CEOs...because the Congressman who will be doing the grilling are very irritated)
In terms of expectations for the MBS market...as the yield curve flattens out the MBS bias will be slightly slanted towards down in coupon, unfortunately muddled prepay expectations make any long term buying convictions hard to sustain. So as MBS investors await direction from the Fed and results from TSY auctions....expect MBS market participants to remain at the ready with their buy/sell tickets. In the coming weeks the MBS strategy will heavily depend on headline news and the shape of the yield curve (even though spreads have been somewhat disconnected lately).
For mortgage bankers this translates into very specific pricing strategies. Some lenders will look to buy the market in short time frames; others will spread out gains over several rate sheets. Loan officers and borrowers will be looking to take advantage of rate sheet improvements on days when the MBS rallies, this implies a mortgage banker supply sell off should not be far behind those rallies.
Never discount the supportive buying powers of the Federal Reserve. The government bid will serve to stabilize any sell offs and signal the renewal of day trading strategies. Until markets receive more details about the Obama Administration's plan to save the world, investors will be left to trade on speculation and rumor. The MBS market will continue to range trade and the yield curve will gyrate along with investor confidence.
Plain and Simple: Stay at the ready with your locks. Don't get greedy because rallies will be hard to sustain.
Now we wait for headline news from the Obama Administration and the Federal Reserve
Economic Data
December US International Trade in Goods and Services....also known as the US Trade Deficit
Press Release: http://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm
Previous: -$40.4bn
Consensus: -$36.0bn
Consensus Range: -$45.0bn to -$31.0bn
Actual: -$39.9bn
The drop in oil prices and a fall in import demand helped the US trade deficit contract in December...but EXPORT demand continues to decrease. Exports reflect the US competitiveness in the world market, they create jobs for American workers, and add to corporate profits...more exports translates into faster GDP growth (relative to exchange rates).
Plain and Simple: We don't want exports to decrease. Today's report shows global demand for goods and services is contracting, further reductions in exports could mean more manufacturing layoffs.
Excerpt from the Press Release:
"The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total December exports of $133.8 billion and imports of $173.7 billion resulted in a goods and services deficit of $39.9 billion, down from $41.6 billion in November, revised. December exports were $8.5 billion less than November exports of $142.3 billion. December imports were $10.2 billion less than November imports of $183.9 billion."
The Congressional hearing has started...I have chuckled three times already
10 yr Treasury Auction at 1pm...