MBS RECAP: Weaker Trend Intact after Retail Sales and Yellen Testimony

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As far as today's market movers are concerned, Retail Sales was dwarfed by Yellen, but most of the reaction to Yellen cancelled itself out.  In other words, Retail Sales accounted for the only decisive push into weaker territory this morning.  Yellen accounted for bigger moves but deposited trading levels right where they had been after Retail Sales.

The damage was anything but severe with Fannie 3.5s not even down an eighth at the moment and 10yr yields up less than a bp.  That said, yesterday was more decisively weak and today's more active session now acts as a sort of confirmation of that weakness. 

This keeps the pressure on bond markets from a technical standpoint in that the possibility of a reversal back to the higher end of the rate range is still alive.  The saving grace was that 10yr yields bounced nicely at 2.57, which is not only a well-traveled inflection point, but also the mid-point for a few technical studies.  Bottom line, staying under 2.57 keeps hope alive.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live. Pricing as of 7/15/14 4:42PMEST Today's Reprice Alerts and Updates 4:06PM  :  Ongoing Weakness Heading Into Last Hour; MBS Still Off Lows 11:27AM  :  Holding Ground/Moderate Bounce; Reprice Risk Pulling Back 11:01AM  :  ALERT ISSUED: Negative Reprice Risk is Increasing 10:33AM  :  ALERT ISSUED: Back Into Weaker Territory as Yellen Q&A Begins; Lows of the Day 10:07AM  :  Back in Positive Territory As Yellen Testimony Begins 8:45AM  :  Bond Markets Weaker After Retail Sales Matthew Graham  :  "depends what you're wanting your boundaries to represent. Definitely 2.66 is important on the high end. On the bullish side, there are more choices. 2.47 and 2.40 are long-term and fairly epic. But some people look at 2.47-2.51 as "2.5" and call it good. In general, it's hard to argue with that stance as trading has been compartmentalized between 3.0 and 2.5 for the most part since mid 2013" Andrew Haynes  :  "im looking at a long term range of 2.43-2.65 and short term of 2.61-2.51 does that sound about right MG?" Michael Mitchell  :  "Hey Guys- What Lender (Retail, correspondent, Wholesale) is still doing Interest only on Jumbo?" Andy Pada, Jr.  :  "i read something like 66%" Christopher Stevens  :  "anyone know Chase drop in mtg business year over year" Discuss the MBS and Mortgage Markets on Our Streaming Dashboard

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MBS Day Ahead: Yellen Testimony, Retail Sales, and Housing Data

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Last week was a dud in terms of scheduled events.  This week isn't the polar opposite, but it's much more active.  Monday and Friday are the only days without at least a few interesting items on tap. 

That said, merely knowing that there's a good amount of data on tap doesn't do much to suggest what will move markets.  We've seen more than our fair share of rates moving in the opposite direction from what the data seems to suggest in 2014.  That makes it hard to look ahead to particular events and say things like "if this report is strong, rates should rise."  Indeed, that hasn't been a safe way to assess the road ahead recently.

The technical landscape seems important.  That is, bond markets--either by coincidence or design--have keyed in on trading levels and ranges that have some of their own significance, regardless of the incoming data.  There's a whole mess of this 'technical' stuff in the 2.34-2.51 area in 10yr yields.  This is sort of the "no man's land" representing the journey between the most repressed yields in history and--well--everything else.

In 2014, yields were as low as 2.40 briefly, and recently returned to bounce around 2.50 on Thursday and Friday.  The risk to the low-rate outlook is that we're witnessing an extended bounce in this zone and a refusal to return to the mid-2011-mid-2013 range.  Incidentally, 2014's lowest yield represents a perfect bounce on 2011/2012's highs.

We can see these lines in the sand in front of us, but can't really know would get us across them.  There are candidates to be sure, but good luck when it comes to ranking them.  With economic data not producing consistent results, perhaps Fed policy is more worthy of attention.  With that in mind, Tuesday and Wednesday bring the semi-annual congressional testimony from Fed Chair Yellen.  Of the two, Tuesday is the bigger potential market mover.

Beyond that, geopolitical risk and European flights-to-safety (inspiring by things like Portugal's banking issues) are constant wild cards.  As far as economic data most likely to do what it normally does (where strength hurts bond markets), Retail Sales on Tuesday is probably the best bet.  Thursday is no slouch, however, with several big reports and the weekly Jobless Claims data covering the same week as July's NFP survey (meaning this week's Claims data is perceived as more relevant by market participants).

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

MBS RECAP: Weaker Trend Intact after Retail Sales and Yellen Testimony

AppId is over the quota
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Gain access to the most accurate real-time back month TBA indications from Thomson Reuters and Tradeweb. LEARN MORE MBS RECAP: Weaker Trend Intact after Retail Sales and Yellen Testimony

As far as today's market movers are concerned, Retail Sales was dwarfed by Yellen, but most of the reaction to Yellen cancelled itself out.  In other words, Retail Sales accounted for the only decisive push into weaker territory this morning.  Yellen accounted for bigger moves but deposited trading levels right where they had been after Retail Sales.

The damage was anything but severe with Fannie 3.5s not even down an eighth at the moment and 10yr yields up less than a bp.  That said, yesterday was more decisively weak and today's more active session now acts as a sort of confirmation of that weakness. 

This keeps the pressure on bond markets from a technical standpoint in that the possibility of a reversal back to the higher end of the rate range is still alive.  The saving grace was that 10yr yields bounced nicely at 2.57, which is not only a well-traveled inflection point, but also the mid-point for a few technical studies.  Bottom line, staying under 2.57 keeps hope alive.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live. Pricing as of 7/15/14 4:42PMEST Today's Reprice Alerts and Updates 4:06PM  :  Ongoing Weakness Heading Into Last Hour; MBS Still Off Lows 11:27AM  :  Holding Ground/Moderate Bounce; Reprice Risk Pulling Back 11:01AM  :  ALERT ISSUED: Negative Reprice Risk is Increasing 10:33AM  :  ALERT ISSUED: Back Into Weaker Territory as Yellen Q&A Begins; Lows of the Day 10:07AM  :  Back in Positive Territory As Yellen Testimony Begins 8:45AM  :  Bond Markets Weaker After Retail Sales Matthew Graham  :  "depends what you're wanting your boundaries to represent. Definitely 2.66 is important on the high end. On the bullish side, there are more choices. 2.47 and 2.40 are long-term and fairly epic. But some people look at 2.47-2.51 as "2.5" and call it good. In general, it's hard to argue with that stance as trading has been compartmentalized between 3.0 and 2.5 for the most part since mid 2013" Andrew Haynes  :  "im looking at a long term range of 2.43-2.65 and short term of 2.61-2.51 does that sound about right MG?" Michael Mitchell  :  "Hey Guys- What Lender (Retail, correspondent, Wholesale) is still doing Interest only on Jumbo?" Andy Pada, Jr.  :  "i read something like 66%" Christopher Stevens  :  "anyone know Chase drop in mtg business year over year" Discuss the MBS and Mortgage Markets on Our Streaming Dashboard

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Car sales see 'strong' six months

  New car sales have seen a 'strong' first half of the year says the Society of Motoring Manufacturers (SMMT).

New figures show car sales rose 10.6% to 1.28m in the six months to June, compared to the same period last year.

The Society of Motoring Manufacturers (SMMT) says the figures mark the best half-year sales total since 2005.

"Improving economic conditions have helped propel the UK new car market to a strong first half-year performance," said SMMT's chief executive Mike Hawes.

"The overall market has risen faster than we were expecting but, after a bumper March, growth is showing signs of stabilising around our forecast level," he added.

Sales of alternatively-fuelled cars rose 51.3% to 23,337.

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Top ten best selling cars in June:

1: Ford Fiesta, 11,213

2: Vauxhall Corsa, 7,961

3: Ford Focus, 7,399

4: Volkswagen Golf, 6,546

5: Vauxhall Astra, 6,249

6: Nissan Qashqai, 5,356

7: Vauxhall Insignia, 4,660

8: Fiat 500, 4,177

9: BMW 3 Series, 3,961

10: Audi A3, 3,893

Source: SMMT

The best selling model in June was the Ford Fiesta with 11,213 sales in June and 70,153 sales in the first six months of the year.

The Ford Focus was the third best selling model in June with 7,399 sold, but it was the second most popular so far this year with 44,754 sold.

Vauxhall saw healthy sales of its three main models - the Corsa, Astra and Insignia - in June. Nissan, Fiat, Volkswagen, BMW and Audi rounded out the top ten.

Splashing out

Howard Archer, chief UK and European economist at HIS Global Insight said the figures suggested things were "looking largely bright for the motor industry" which he said should continue to fuel ongoing healthy car sales.

He added: "The motor industry will be hoping that ongoing robust UK economic activity continues to underpin consumer and business confidence, and their willingness to splash out on new cars."

Separately, a committee of MPs has called on insurers to be banned from settling whiplash injury damage claims, without first seeking for a proper medical assessment, in order to limit fraudulent claims.

The transport committee has published a report has said the government should also stop personal injury lawyers from offering inducements, such as cash or tablet computers designed to encourage injured drivers to bring claims.

Data from the Association of British Insurers (ABI) shows fraudulent motor insurance claims were the most expensive and common types of claims. The ABI said fraudulent motor insurance claims jumped 34% in 2013.