MBS OPEN: Rates Lower as Dollar Corrects

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Recap of Yesterday

  • Australia's Central Bank becomes first G20 country to raise interest rates. The RBA raised their key cash rate by 25bps to 3.25%. Also said it would cut back stimulus bc worst of crisis had passed. Australian dollar hits 14 month high
  • The US dollar gets beat up after RBA raises rates. Dollar Index falls 0.43% to 76.32 near 13 month low of 75.83. Euro ends day near $1.4712. Yen at 88.79. Australian dollar +1.32% at $0.8894
  • Investors buy Gold to hedge their dollar denominated portfolios against currency devaluations. Gold hits record high at $1,045/ounce (Dec Futures contract).
  • RBA rate hike adds optimism to economic outlooks around the world. Global equity markets rally on news. US stocks follow the leader...S&P +1.37% to 1,054, NASDAQ +1.71% to 2,103, Dow +1.37% to 9,731. Falling US dollar helped commodities based equities lead the rally. (Should lead the correction too)
  • Treasury prices fall, yields rise....the curve steepened. 2s/10s 2bps steeper to 236bps
  • TSY auctions $39bn 3yr notes. Stops at 1.445% vs. 1.440% 1pm When Issued bids. Direct bidders take home 10.8%, higher than average. Indirects awarded 49.1%, below average. TSY market had muted reaction to auction results as concession was built in ahead of bidding
  • 10yr TSY note tests key technical level at 3.27%....does not break, a good sign!
  • MBS trading picked up ahead of prepay reports as cheaper dollar prices allowed accounts to do some PRE-prepay report buying
  • Fed always present. Rate sheet influential MBS coupon yield spreads slightly tighter.
  • MBS Current Coupon ends day at 4.1276%. CC +69/10yr swap. CC +86/10yr TSY
  • September prepay report was released last night...as expected, prepay speeds slowed down. Loan production is not picking up...regardless of record low mortgage rates.
  • FN 4.5 ends day at 101-20. FN 4.0 ends day at 99-13
  • Rate sheets still paying at 4.50
  • Fannie pushes back originator identification data requirements


So Far This Morning

  • CHINA CLOSED, NIKKEI +1.11%, HANG SENG +2.07%, FTSE -0.38%, CAC -0.16%, DAX -0.21%
  • Mortgage applications increase in week ending October 2. READ MORE
  • US dollar has recovered a portion of yesterday's losses. As the dollar has corrected, oil and gold prices have fallen.
  • US stock futures rallied higher overnight, however as dollar began to gain value this morning, stocks grew progressively weaker.
  • US TSYs were sideways overnight, rallying this morning when equity futures ticked lower. So lower TSY and MBS yields are an indirect function of a correction in the value of the dollar.

  • The 10yr TSY is currently +12/32 at 103-15 yielding 3.211%.
  • The FN 4.0 is +8/32 at 99-21 yielding 4.0411%.
  • The FN 4.5 is +4/32 at 101-24 yielding 4.2850%
  • The secondary market current coupon is 4.0898%

Here is the FN 4.5 two day...

MBS, TSY, LIBOR QUOTES