Yesterday MBS lost -7 basis points from Friday's close. The benchmark FNMA 3.50 November MBS has once again moved in a very narrow range and as a result, mortgage rates did not change.
We had two mid-level reports and one major economic report that hit Monday morning and neither really moved the needle on MBS pricing. Both Industrial Production and Capacity Utilization were stronger than expected and would have normally pressure MBS leading to worse pricing but our floor of support located at the bottom of our trading channel held nicely and prevented MBS from selling off.
Existing Home Sales were much weaker than the consensus estimates (-5.6% vs. the estimated -0.5%). Normally this weaker than expected economic data would be positive for MBS and you would have seen an improvement in pricing. But we are far from "Normal" in this market. Our overhead ceiling of resistance located at the top our intra-day trading channel would put a stopper in any rally. But more importantly, is was the fact that the market wasn't trading on the consensus expectations. The market was trading on "whisper" numbers. What are "whisper" numbers? This is basically what traders are bantering around without regards to what the egg-head economists think. And in this case they were right. And it makes sense. September's interest rates had risen and many consumers were concerned about their job status with the looming government shutdown that was most likely going to hit on October 1st, which it did. We had a 2 year Treasury note auction where we sold $32 billion of our nation's debt. There was actually very strong demand for the auction with a bid-to-cover ratio of 3.32. However, the 2 year note is too short term to impact longer bond prices like MBS.
Headline Retail Sales were weaker than expected (-0.1 vs. the estimated 0.1%) this is generally good for bonds, but this reading could have been a lot worse. Offsetting that miss is the Ex-Auto data which hit consensus estimates at 0.4%. PPI was very tame was lighter than expectations (-0.1 vs. the estimated 0.2%). Bonds love low inflationary data, but the core PPI matched expectations at 0.1%. Consumer Confidence 71.2 vs. the estimated 75.0, this is good for your pricing and may help MBS test the top of our trading channel.
So, what we have here is nothing special. There is nothing in this morning's data to cause MBS to rally in a significant way. And there is certainly nothing here to cause a major sell off.
So, what we have here is nothing special. There is nothing in this morning's data to cause MBS to rally in a significant way. And there is certainly nothing here to cause a major sell off.
Today is another day with a full calendar of economic data releases. While it is likely we will end the day very near to how we started it, the various economic releases may cause some turbulance within the day's pricing. Remember that the mortgage professional who sent you this report today is also monitoring the MBS market in real time and is your best resource to stay ahead of lender's pricing reactions to the market.
Contact us today for a free rate quote and Good Faith Estimate. We will also keep you fully up to date on live pricing adjustments and released market data.
- Michael Corboy
www.specialtyfinancialmtg.com
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