[MBS Commentary] – MBS MID-DAY: Slow Start, But Positive

MBS MID-DAY: Slow Start, But Positive

Posted to: MBS Commentary
Monday, April 30, 2012 11:06 AM

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MBS Live: MBS Morning Market Summary
Despite a much weaker-than-expected Chicago PMI, bond markets have generally been content trading in slightly better territory in a very narrow range, and in very low volume.  More than a little bit of the “low volume” portion of today’s equation is courtesy of Asian and European players being out of the game for Holiday-related reasons.  That leaves domestic markets slightly less inspired than they otherwise might be given the presence of a decent round-up of economic data for a Monday morning.  That said, it’s still a Monday morning.  Additionally, there are more holiday-related absences to come, not to mention that NFP is on Friday, meaning that everything else already feels that much less consequential by comparison. 
MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

FNMA 3.5
103-27 : +0-04
FNMA 4.0
105-24 : +0-03
FNMA 4.5
107-02 : +0-02
FNMA 5.0
108-19 : +0-01
GNMA 3.5
105-11 : +0-04
GNMA 4.0
108-04 : +0-03
GNMA 4.5
109-11 : +0-01
GNMA 5.0
110-22 : +0-02
FHLMC 3.5
103-21 : +0-05
FHLMC 4.0
105-14 : +0-03
FHLMC 4.5
106-19 : +0-02
FHLMC 5.0
108-02 : +0-01
Pricing as of 11:06 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.

10:51AM  :  Census Bureau Releases Home Ownership/Rental Statistics for Q1

National vacancy rates in the first quarter 2012 were 8.8 percent for rental housing and 2.2 percent for homeowner housing, the Department of Commerce’s Census Bureau announced today. The rental vacancy rate of 8.8 percent was 0.9 percentage points lower than the rate recorded in the first quarter 2011 (+/-0.4 percentage points) and 0.6 percentage points lower than last quarter (+/-0.4). The homeowner vacancy rate of 2.2 percent was 0.4 percentage points lower than the first quarter 2011 rate (+/-0.2) and 0.1 percentage point lower (+/-0.1)* than the rate last quarter (2.3 percent).

The homeownership rate of 65.4 percent was 1.0 percentage points (+/-0.4) lower than the first quarter 2011 rate (66.4 percent) and 0.6 percentage points (+/-0.4) lower than the rate last quarter (66.0 percent).

Charts, Tables, and More Data:

9:56AM  :  ECON: Chicago PMI Much Weaker Than Expected

The Chicago Institute for Supply Management today reported that its Purchasing Management Index fell to 56.2 in April vs 62.2 in March. Economists surveyed by Reuters expected today’s reading to hit 61.0.

Although this is the lowest level for the index since November 2009, a reading above 50.0 indicates that business activity continues to expand, a trend that has remained intact since October 2009.

Drops in New Orders and Production accounted for a majority of the weakness while the Employment component actually improved to 58.7 from March’s 56.3.

market reaction: perhaps even weaker than the report itself with both MBS and Treasuries gesturing toward the morning’s best levels only to shy away rather quickly. That said, the story isn’t over yet. Volumes are still on the low side and further stock selling could have a beneficial effect for bond markets given the low volume and absence of other market moving data.

9:25AM  :  ALERT ISSUED: Bond Markets Slightly Improved After Quiet Overnight Session

Volume and volatility were all but absent overnight as much of Asia was out of commission for the start of “golden week.” European trading did little to move things from Friday’s latest levels despite Spain’s 0.1 pct GDP beat. European participation was also lower as many participants opt for a 4 day weekend through tomorrow’s May Day holiday.

Domestically, things are slightly improved in the first hour of trade with the Incomes/Outlays report having very little impact as expected. Volume has been flat, steady, and low. More to the point, and without consideration of any rallying or selling in bond markets, we can observe 10yr yields bounce at 1.9102 this morning without going lower. This seems to be a validation of uninspired range-trading considering the recent domestic session low on 4/23 of 1.9104.

MBS are 3 ticks higher this morning in Fannie 3.5 coupons at 103-26, a mere eighth of a point off 4/10 highs. That said, the current range is the highest that production MBS have stably been, not to mention the fact that this jaunt is already more stable than previous visits.

The only other scheduled economic data of the morning arrives in about 20 minutes with Chicago PMI. It’s not normally a tremendous market mover, but its impact could be more noticeable today due to light volume.

8:38AM  :  ECON: Incomes Accelerate, Spending Decelerates, Inflation Tame

* Income +0.4 pct vs +0.3 pct consensus
* Spending +0.3 pct vs +0.4 pct consensus
* Core PCE +0.1583 vs +0.2 pct consensus
* Savings rate 3.8 vs 3.7 previously
* ‘Real’ consumer spending +0.1 pct vs +0.5 pct previously

Personal income increased $50.3 billion, or 0.4 percent, and disposable personal income (DPI) increased $42.5 billion, or 0.4 percent, in March, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $29.6 billion, or 0.3 percent. In February, personal income increased $39.6 billion, or 0.3 percent, DPI increased $29.4 billion, or 0.2 percent, and PCE increased $93.7 billion, or 0.9 percent, based on revised estimates.

Real disposable income increased 0.2 percent in March, in contrast to a decrease of 0.1 percent in February. Real PCE increased 0.1 percent, compared with an increase of 0.5 percent.

Private wage and salary disbursements increased $17.3 billion in March, compared with an increase of $24.1 billion in February. Goods-producing industries’ payrolls decreased $1.3 billion, in contrast to an increase of $1.8 billion; manufacturing payrolls increased $0.1 billion, compared with an increase of $1.6 billion. Services-producing industries’ payrolls increased $18.6 billion, compared with an increase of $22.3 billion. Government wage and salary disbursements increased $1.4 billion, compared with an increase of $0.7 billion.

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  :  “RTRS- U.S. HOMEOWNER VACANCY RATE FALLS TO 2.2 PERCENT IN FIRST QUARTER FROM 2.3 PERCENT IN FOURTH QUARTER; RENTAL VACANCY RATE FALLS TO 8.8 PERCENT FROM 9.4 PERCENT “
Matthew Graham  :  “RTRS – U.S. HOMEOWNERSHIP RATE FALLS TO 65.4 PERCENT IN FIRST QUARTER FROM 66.0 PERCENT IN FOURTH QUARTER – U.S. COMMERCE DEPARTMENT “
Matthew Graham  :  “i have other news too. it’s actually housing-related which is nice for a change.”
B-C  :  ok i don’t want to get ahead of myself too early on a Monday morning”
Matthew Graham  :  “semi-officially”
B-C  :  “MG can we offically call it the lack of jobs report yet?”
B-C  :  “or LACK of jobs”
Matthew Graham  :  “Reuters Instant Views – TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK “The underlying details slowed rather sharply and while the employment index was up, that is just one factor and does not offset this weak report. More important, this rounds out the round of disappointing regional data we have had. The national ISM is likely to be on the disappointing side. This does not change anything on the potential for QE3, but Friday’s jobs report should be more useful with that”
Matthew Graham  :  “RTRS – CHICAGO PURCHASING MANAGEMENT INDEX AT LOWEST SINCE NOVEMBER 2009 “
Matthew Graham  :  “RTRS – CHICAGO PURCHASING MANAGEMENT INDEX 56.2 IN APRIL (CONSENSUS 61.0) VS 62.2 IN MARCH “
MMNJ  :  “Plaza JUST rolled it — although the way they condition the crap out of 30 LTV 800 FICO conventional loans I would tread carefully….”
Matthew Graham  :  http://tinyurl.com/7l7un86”
Matthew Graham  :  “New Plaza Jumbo program? $2.5 mln, 80LTV, 700 FICO, Condo eligible, 6% seller-paids
Tony Cardinal  :  “Ha. Thx for the insight. Gotta love the news. “
Matthew Graham  :  “the “in a recession” tidbit is just a way for media to dress up an otherwise uneventful headline”
Matthew Graham  :  “not so much. they actually beat their GDP forecast by 0.1.”
Tony Cardinal  :  “So Spain is announcing they are in a recession. Thats gotta be bond friendly, no?”
Matthew Graham  :  “”While the ‘income’ component is important for evaluating consumer spending, and the “consumption component” or PCE (personal consumption expenditures) is a major contributor to GDP, they’re both a bit backward looking. Given that we already got a preliminary look at Q1 GDP and that today’s PCE is for the month of March (which falls in Q1), it’s not a report that generates a lot of fuss unless it deviates significantly from expectations. “”
Matthew Graham  :  “RTRS – US MARCH PERSONAL INCOME +0.4 PCT (CONS +0.3 PCT) VS FEB +0.3 PCT (PREV +0.2 PCT) “
Matthew Graham  :  “RTRS – US MARCH PERSONAL SPENDING +0.3 PCT (CONSENSUS +0.4 PCT) VS FEB +0.9 PCT (PREV +0.8 PCT) “

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