What happened yesterday?
Mortgage backed securities (MBS) lost -12 basis points (BPS) from Friday’s close which caused 30 year fixed mortgage rates to move sideways.
There is nothing new to report, Monday was one of those days without any major economic data to move the markets. The only story was Greece…but not much moved pricing on Monday.
Grexit: There was an outright victory for Syriza, giving it an absolute, 151-seat majority in parliament. The new President has already issued several “anti-austerity” statements that are reflective of the Greek sentiment. Bond traders are trying to understand just how much impact this will have on the Eurozone as at the very least, Greece will get a hair cut and at the worst will switch back to their own currency and leave the Euro at some point this year.
We are seeing a nice rally in MBS due to our weaker than expected domestic news.
Durable Goods: December Durable Goods Orders were -3.4% vs estimates of 0.5%; Ex1Transportation was -0.8 vs estimates of 0.6%. Plus the prior reading was revised from -0.9% down to -2.1%. This is a huge miss and we have certainly seen some wild swings in this reading and huge revisions to prior releases, but this is a very weak report and is very positive for MBS as traders begin to think that Friday’s 4th quarter GDP will come in below 3.00%…this report is the prevailing force this morning.
Case-Shiller: Came in right at expectations with a gain of 4.3% and is not impacting pricing.
Consumer Confidence: This is the second biggest report of the day and it shot right off of the charts breaking 100 with a reading of 102.9 vs estimates of 95.0. This is certainly mostly due to lower gas prices but the question is: When will that actually lead to higher consumer spending? Regardless, this reading is negative for MBS.
New Home Sales: Were stronger than expected (481K vs estimates of 450K) but really not going to be a factor in pricing until that reading is consistently higher than 500K.