US DATA: MBA Mortgage Activity Returns To Doldrums Despite Rate Downtick
The MBA mortgage application composite index fell 6.6% in the Feb 14 week on a seasonally-adjusted basis, with the level of the index dropping to 6-week lows.
- Purchase applications fell for a 4th consecutive week (-5.9%), with refinancings falling for the first week in the past three (-7.3%).
- The deterioration comes despite a small downtick in 30Y conforming mortgage rates in the last few weeks: after peaking at 7.09% in the Jan 10 week, rates have pulled back in small increments to 6.93% latest (an 8-week low).
- That's come alongside a pullback in Treasury yields, though spreads between conforming 30Y mortgages and 10Y Tsys have widened to just over 245bp from 233bp in the Jan 10 week.
- Jumbo mortgage rates have been fairly steady at around 7% since mid-December, with the conforming-to-jumbo spread moving from slight positive territory back to negative (jumbos trading richer).
- In short, mortgage activity remains extremely subdued, with few signs of life in the last 2 years outside of a brief rise in refinancings in September as Treasury yields fell in anticipation of the Fed rate cut cycle starting.
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EFSF ISSUANCE: New 3-year / new 10-year: Allocations
New long 3-year:
- Spread set earlier at MS+19bp (guidance was MS + 21 bps area)
- Size: E3bln (MNI expected E3-5bln)
- Books closed in excess of E27bln (inc E1.5bln JLM interest)
- HR: 107% vs 2.20% Apr-28 Bobl
- Maturity: 27 July 2028
- Coupon: Short first
- ISIN: EU000A2SCAR0
New 10-year:
- Spread set earlier at MS+50bp (guidance wasMS + 53 bps area
- Size: E4bln (MNI expected E3-5bln)
- Books in excess of E33bln (inc E1.5bln JLM interest)
- HR 97% vs 2.50% Feb-35 Bund
- Maturity: 29 January 2035
- Coupon: Long first
- ISIN: EU000A2SCAS8
For both:
- Total size: E7bln (MNI expected E7-8bln)
- Settlement: 27 January 2025 (T+5)
- Bookrunners: BARCLAYS / BNP / JPM (DM/B&D)
- Timing: Hedge deadline 13:25GMT / 14:25CET. Pricing to follow
From market source
GILTS: Wider Vs. EGBs, Tuesday's UK Risk Events Eyed
Gilts continue to widen vs. EGBs, with little in the way of meaningful UK headline flow seen.
- Best guesses point to setup ahead of tomorrow’s risk events, with labour market data due first thing (07:00 London) and expectations for the syndicated tap of the Jan-40 4.375% line to be held.
- UK fiscal and issuance risks could also be a background factor here given tightening of gilt/Bunds in recent sessions, although it’s always hard to pin down the exacts for these sorts of moves.
- Futures as low 91.10 before a recovery to 91.25, comfortably above initial support at the January 16 low (90.68). Bearish technical picture intact.
- Yields 2.0-4.5bp higher, curve a little steeper on the day. 2s10s and 5s30s remain below respective ’25 closing highs.
- 10-Year gilt/Bunds ~3bp wider, crossing back above 215bp, after registering the lowest close since November on Friday.
GLOBAL POLITICAL RISK: Week Ahead 20-26 January
MNI's Political Risk team has published its Week Ahead article looking at some of the major political risk events taking place around the world over the coming seven days. Includes info on the Trump inauguration in the US, which is set to be followed by a flurry of new executive orders. Meanwhile, global political and business leaders meet in Davos for the annual World Economic Forum gathering.
Full article PDF attached below:
