Mortgage market update

[Jesse Gonzalez]

Mods, if this is in the wrong area please move or delete.

I pay for a monthly service that gives daily updates to the mortgage market, specifically how MBS are trading and market influences that sway pricing. I'm happy to repost here as I receive updates and if people don't want this then I'm also happy not to post, below is today's update from tbwsratealert.com

What happened yesterday?

Mortgage backed securities (MBS) lost -78 basis points from Wednesday's close which caused 30 year fixed rates to move upward.This was the third straight days of sell offs. MBS have lost -149BPS so far this week and hit their highest levels of 2013.
Both Great Brittan and the ECB left their key interest rates alone this morning.

The much anticipated ADP Private Payroll report came in at 176K. The original consensus estimates were for a gain of 157K but that was revised upward to 180K. So the reading of 176K was right in line. You would have needed a big miss to the down-side to see an improvement in pricing and we simply didn't get it.

Initial Jobless Claims fell another 9K last week and came in at 323K which was better than the consensus estimates of 330K. This, coupled with the ADP data is giving traders reason to bet that Friday's Non-Farm Payrolls will be better than expected and potentially give the Fed enough data to start tapering on Sept 18th.

But Non-Farm Productivity was much better than expected at 2.3% vs estimates of 1.5% and it was a big-time gain over the prior reading of -1.7%. Long term bonds love a good productivity number and this reading has helped MBS to temporarily rebound off of our early morning lows.

The biggest economic report to move MBS yesterday was the ISM Non-Manufacturing report. This measures the servicing sector which accounts for 2/3 of our economy. And it was much better than expected coming in at a blistering 58.6 vs the consensus estimates of 55.2. This report hammered MBS pricing causing MBS to fall from -25BPS just before the report to -48BPS by 11EDT.

U.S. Factory Orders were also better than expected. The market was expecting Factory Orders to fall -3.5% but instead they only fell -2.4%. This was also negative for MBS pricing.

MBS moved even lower (worse pricing for you) after news out of the G20 meeting hit the wires that Russian President Putin told President Obama that if the U.S. hit Syria that Russia would support Syria. This caused traders to further discount the likelihood that there would be a strike in the near term. This reduced the "fear factor" premium in bonds.