A word on past week’s MBS trading

Here are some tidbits for the day and some comments on MBS markets this past week:

-The cost of placing ads on Facebook is rising rapidly: the “cost per click” of an ad placed on Facebook has increased by 74% over last year.

-Reader’s Digest Association, the 90-year-old publishing and marketing company that emerged from bankruptcy last year, is looking to sell itself for at least $1 billion (the company publishes more than 90 magazines and runs a successful direct marketing operation).

-U.S. book retailer Borders is fast moving toward liquidation of the company’s assets as it will begin to sell its remaining 399 stores on Friday after Borders failed to reach an agreement with a potential buyer. (Borders Group President Mike Edwards said they tried to avert liquidation, but could not prevent it because of the changes in the book industry, the rise of the electronic reader and the weak American economy.)

-Wells Fargo’s earnings came in slightly better than expected, 70 cents per share versus 68 cents. Bank of America came out in line with a loss of 90 cents per share. And Goldman Sachs did much worse: $1.85 per share versus $2.25 (primarily due to fixed-income trading).

-Shares of MGIC tumbled yesterday after the company swung to a second-quarter loss. MGIC is the largest MI company, and its stock fell 23% in one day. Radian (#2) fell 14%, PMI dropped 13%. Group Inc. (PMI) dropped 13 percent, and Genworth Financial’s stock was down almost 8%. MGIC reported a net loss of $151.7 million for the quarter, its 15th unprofitable period in 16 quarters.

–JPMorgan Chase overhauls troubled mortgage unit

MBS Market Comments
Last week the 10-year note yield held below 3.0%, but that may change this week given this morning’s housing numbers. Remember that our economy is struggling to grow and as long as the housing sector remains in a downward trend, and job growth is non-existent, that will continue. Unlike last week, this week there is no Treasury borrowing, and it is all about housing and earnings with expectations high for strong housing numbers – which is exactly what we saw this morning. Existing Home Sales are expected to be up about 2.0% and home prices are expected to be up slightly as well. It was reported that homebuilder sentiment increased slightly this month (but builders still have competition from distressed properties, inaccurate appraisals of new homes, and tight lending). Yesterday the 10-yr closed at a yield of 2.91%, mostly focused on the ongoing saga with US and European deficits. “Traders reported light buying from money managers and insurance companies; hedge funds were better sellers, particularly in 4s and 4.5s, while overseas was quiet with Japan closed for a holiday. Mortgage banker selling was on track for another limited session…”