Weekly Mortgage Overview: 8/12/2014

By August 12, 2014Mortgage Overview

What’s on the agenda for today?

Weak European data will contribute to keeping MBS trading in a very nice range. However, any real rally is not in the cards as there is significant technical resistance just overhead.

Mortgage Backed Securities (MBS) Overview

Optimism among small business owners edged higher in July, according to a survey by the National Federation of Independent Business (NFIB). The reading barely beat out market expectations (95.7 vs est of 95.3) and is not a major factor in early pricing.

Today will once again be about international events as our own scheduled domestic data has little chance of causing material swings in pricing.

MBS are receiving early support due to a weaker than expected ZEW Survey for Economic Sentiment in Germany and in the EU.

But here are the top three international stories that long-bond traders are paying the most attention to:

Ukraine: Ukraine blocks Russian humanitarian convoy, accuses Kremlin of sending “disguised military gear,” as 300 Russian vehicles seek access to the Ukraine.

Israel: Wide gaps remain between Israel and the Palestinians in reaching a long-term deal on the Gaza Strip, an Israeli official said, as Hamas warned there would be no more truces beyond the one due to end midnight tomorrow.

Iraq: Their political crisis deepened as embattled Prime Minister Nouri al-Maliki refused to hand power to designated successor Haidar al-Abadi, and soldiers and militiamen fanned out across the capital, Baghdad.

What happened yesterday?

MBS gained +2 basis points (BPS) from Friday’s close (net of the monthly bond coupon rollover) which caused 30 year fixed mortgage rates to move sideways. Once again the stock market (+16.05) and our MBS (+2BPS) both moved in the same direction and barely squeaked out some gains.

There were no major (or minor) domestic economic releases yesterday, nor where there any major Treasury auctions to guide pricing. As a result, we moved in a narrow range with very limited momentum.

Stories that bond traders were watching closely:

Iraq’s Prime Minister Maliki refuses to step down and is accusing the U.S. of a coup and violating the Iraq constitution.

Russia has said it wants to send “humanitarian” relief into the Ukraine. This certainly has everyone on alert as this can’t possibly go well for the Ukrainians.

Israel and Hamas Gaza cease-fire held as negotiators reconvene in Cairo.

So…nothing that would cause a spike in “fear factor” buying of bonds.