Yesterday, mortgages tightened slightly as continued demand from the Fed and steady purchases from money managers in higher coupons was enough to counter the supply brought to market from originators. Mortgages tightened (outperformed) versus swaps by 1-2/32nds by 3:00pm. Originator selling for the day was ~$3.5bln, which is just over the $3.2bln daily average seen this month. At 5:00pm, the FNCL 4.0 was +2.5/32 at 99-29+ and the FNCI 4.0 was +4.0/32 at 101-12+.
The economic releases yesterday included the housing starts data for April. The report showed that new housing starts fell by 13% since March, which is down to an annualized rate of 458k. Analysts had actually expected a small 2.0% improvement month over month which would have reinforced the improvement seen in the NAHB index on Monday. Many in the industry feel that it will still be months before we see any recovery in new construction. The amount of permits issued for new construction projects also fell last month. Building permits were down 3.3% from March as home builders have been waiting for customers to fully qualify for financing before they start new projects.
This morning the MBA's mortgage application survey was released, and showed that the index rose by 2.3% last week as slightly lower financing rates bolstered refinance activity. Also the minutes from the last FOMC meeting will be released this afternoon and the market will be looking for any updates or status on the quantitative easing programs that are now in place. Currently, treasuries are little changed in front of the Fed's planned purchase activity today. The Fed today will be targeting issues maturing from Feb 2016 to May 2019. Right now, the 2yr is +0.5/32 (0.883) and the 10yr is +0.5/32 (3.243). Equity futures are pointing to a slightly higher open following yesterday's sell-off. Dow futures are +35.0 and S&P futures are +4.2.