MBS are down -6/32 (FNMA 30-yr 3.5 at 102.26), around 5/32 lower than yesterday at this time.
European bond markets are leading global markets this morning. Increased concern that the European Central Bank and the Bank of England may be closer to tightening monetary policy than expected has pushed global bond yields higher. In addition, today’s German inflation data came in stronger than expected. In the U.S., first quarter GDP was revised higher from 1.2% to 1.4%, above the consensus for a flat reading of 1.2%. Weekly Jobless Claims came in close to expectations. The Dow is down 10 points. No more economic data will be released today.
MBS are up +12/32 (FNMA 30-yr 3.5 at 103.12), close to most volatile morning levels, but 4/32 below the highs. First some favorable and later some unfavorable repricing was seen. Weaker than expected economic data caused a nice rally in MBS this morning, but some of the gains were lost after the Fed meeting (see below). The Dow is up 50 points. Tomorrow, Philly Fed, Import Prices, Empire State, and Industrial Production will be released.
The Fed provided more details on its plan to reduce its holdings of Treasuries and MBS. The reduction is expected to start some time in 2017. They will reduce their holdings by not reinvesting all the principle payments received, as they are currently doing. The amount of principle payment received that will not be reinvested will start at $10 billion per month and will grow over twelve months to $50 billion per month. This plan told investors that future demand from the Fed for MBS may be lower than had been expected, which hurt MBS prices.
MBS are down -1/32 (FNMA 30-yr 3.5 at 103.01), around 1/32 lower than Friday at this time.
It has been a quiet morning. The Dow is down 50 points. No economic data will be released today. The results from the 3-yr Treasury auction will come out around 11:30 et and the 10-yr Treasury auction will come out around 1:00 et.
The monthly rollover took place over the weekend for FNMA and FHLMC 30-yr securities. The current coupon switched from the June to the July contract. If you are tracking daily MBS price movements, July MBS prices reflected a drop of about -5/32 from June. This change is priced in over the course of the month, so the impact on mortgage rates on the day of the rollover is generally no greater than on any other day of the month.
MBS are down -1/32 (FNMA 30-yr 3.5 at 103.09), close to morning levels. It was a quiet session. Former FBI director Comey’s testimony had little impact on MBS. The Dow is up 10 points. Tomorrow, no economic data will be released. The results from the British election may affect MBS prices tomorrow at the open. Prime Minister May is expected to win. If she does, it also will be important to see how many seats in Parliament her party won.
Freddie Mac reported that average mortgage rates fell in the week through June 8, with 30-yrs hitting 3.89%, from 3.94% the prior week.
MBS are down -1/32 (FNMA 30-yr 3.5 at 103.09), around 4/32 lower than yesterday at this time.
As expected, the European Central Bank (ECB) made no change in policy this morning. The statement removed a reference to the possibility of further rate cuts. ECB President Draghi gave a more upbeat view of the outlook for economic growth, but he said that inflation pressures remained low. There was little reaction to the meeting. In the U.S., weekly Jobless Claims fell to 245K, a little above the consensus of 240K. The Dow is up 10 points. No more economic data will be released today. Former FBI director Comey will testify at 10:00 et. Some results from the British election might be clear before the close of U.S. markets today, but the actual outcome likely will not be known until after the close.