MBS RECAP: 2/3/2011

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MBSonMND: MBS RECAP
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FNMA 3.5
94-05 : -0-15
FNMA 4.0
98-02 : -0-12
FNMA 4.5
101-10 : -0-12
FNMA 5.0
104-03 : -0-12
GNMA 3.5
94-30 : -0-14
GNMA 4.0
99-11 : -0-13
GNMA 4.5
102-15 : -0-12
GNMA 5.0
105-10 : -0-11
FHLMC 3.5
93-31 : -0-15
FHLMC 4.0
97-30 : -0-13
FHLMC 4.5
101-07 : -0-12
FHLMC 5.0
103-29 : -0-13
Pricing as of 4:03 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
3:14PM  :  ALERT: Bonds Continue To Push The Lows
10yr yields are at 3.54 and MBS FNCL 4.5's are at the lows of the day at 101-09. This will result in lenders continuing to reprice for the worse, but we can't really say it means anything considering the low volume and the looming NFP. Again, the range can't be considered truly broken without confirmation from NFP tomorrow. So the market has us up against the wall to some extent, but don't lose composure if you're waiting for a definitive range break. We can't know whether or not that's what we're seeing until tomorrow..
2:42PM  :  Quantifying The Relative Insignificance Of Today Vs. Tomorrow
Not to say that today doesn't matter, but compared to tomorrow, and with respect to each days' ability to nudge us out of "the range," today is nothing and tomorrow is everything. At least it's everything for now as it will arrive at a time where yields are at one extreme end of their range. To reiterate the non-existence of "threat to the range" posed by today's trade, the market has spoken. Volume surged in the 10am hour and firmly supported the range. 10 minute moving averages for treasury futures volume around that time were 45k contracts. Current 10 minute moving averages are under 15k, and falling.
2:12PM  :  ALERT: Falling Now, MBS Near Lows. Reintroducing Reprice Risk
The return of the "I" word.... Following Bernanke, there's some noticeable inflation buzz. Thus far, it hasn't pushed bonds outside the worst levels of their range today, but close. 10 yr yields have backed up to 3.539 and FNCL 4.5's have fallen to 101-12. This is likely good enough to see reprices for the WORSE.
1:50PM  :  MBS and Treasuries Weaken Slightly, But Within Range
During the Bernanke Q&A session, both MBS and treasuries have weakened slightly, though both are within the range of their previous highs and lows today. FNCL 4.5's are at 101-14 and 10yr yields are up to 3.525. It's not assumed that there is a causal relationship here, just noting that they have been occurring at the same time. Volume is rather low.
1:06PM  :  With Volume Trailing Off, MBS Are Dead Flat
Bernanke speech text is out and despite a little blip in bond prices, things continue to be exceedingly flat this afternoon, especially for MBS. FNCL 4.5's are currently at 101-16 and the 10yr is at 3.515.
12:35PM  :  Bernanke Discusses the Challenges of the Economic Recovery
Ben Bernanke, the chairman of the Federal Reserve, will address the National Press Club today, delivering a speech titled “The Economic Outlook and Macroeconomic Policies,” as well as take written questions from reporters in the audience. While the speech is an important precursor to Ben's appearance next week before the House Budget Committee, we are most interested in the Q&A session that will follow. We don't expect journalists to hold back their skepticism. Bernanke's credibility is at risk here: http://www.c-span.org/Events/Federal-Reserve-Chairman-Discusses-the-Challenges-of-the-Economic-Recovery/10737419365/
12:24PM  :  Strong Volume In Support Of The Range
Two things we've mentioned recently that are pertinent to today's action. 1) not uncommon to see outer-limits range-testing ahead of data like NFP. 2) 3.56 is the outer limit. In addition, we also need to keep in mind that even the 3.50 that marks the less extreme perception of the range is based on CLOSING marks, so in the grand scheme, a close at or under 3.50 makes the range completely unbroken despite inter-day forays. All that aside, volume has already shown us a stalwart defense of the range, rising as much as it has needed to to keep the range intact. When yields have drifted higher this morning, the volume has stayed heavy until yields returned near 3.50. 10yr contracts have been over 200k for the 9am, 10am, and 11am hours today, versus 132k, 105k, and 169k yesterday.
11:41AM  :  Bonds Go Sideways Now As Stocks Continue To Rally
10yr yields turned the corner before breaking below 3.50 and are currently at 3.513. FNCL 4.5's are in a range between 101-19 and 101-16, currently on the lower end. The narrowness and stability of the range makes reprices for the worse unlikely, and reprices for the better are possible from lenders that priced with an eye toward the morning weakness.
11:19AM  :  New MBS Commentary Post
11:03AM  :  Despite Rising Stocks, Bonds Continue To Hold Range
Showing themselves to be content to march to the beat of their own drummer, bonds continue to hold relatively stable levels despite a stock market that has rallied somewhat off it's morning lows. 10yr yields are at 3.505 and FNCL 4.5's 101-17. No risks of reprices for the worse, and to reiterate previous notes, we could see reprices for the better (in small amounts) the longer this ground-holding/rallying persists in bonds. But keep an eye out today for volatility.
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Terry Colabrese  :  "I am amazed the Dow is over 12,000! Who woul dhave guessed this 10 month's ago?"
Victor Burek  :  "they improved pricing .125 earlier, and just took it away"
Victor Burek  :  "flagstar reprice worse"
Oliver S. Orlicki  :  "pfg -.125"
Matthew Graham  :  "Nice Job taking care of each other re: gutflop when I was writing that last update guys... "
George Rodgers  :  "Got it and am reading it now. "
Ira Selwin  :  "http://www.mortgagenewsdaily.com/mortgage_rates/blog/49123.aspx"
Matt Hodges  :  "George - i had my 2nd best year last year in the biz by following it's rules"
Matt Hodges  :  "read it, live it, love it"
Steve  :  "its the theory behind closing the loans that pay the bills Geoge"
George Rodgers  :  "Gutflop?"
Matt Hodges  :  "gutflop, GR"
George Rodgers  :  "Float or lock on a purchase closing in 45 days?"
Matthew Graham  :  "seriously... no reason to frown... it's the day before NFP, right? C'mon... you really think anything is being "decided" today with respect to the range? Nah... Market is just trying to scare you. "
Brayden Alexander  :  "goosebumps!"
Jason York  :  "you turned my frown upside down"
Matthew Graham  :  "as far as outlook, here's your outlook: We're nowhere near the amount of volume that might come close to suggesting this is an actual test of the range. We're not even in the same ballpark. Not even in the same league. Not even playing the same game! If any of you BELIEVE in your hearts that the range that has endured for so long and through plenty of inflation-hawk, speculative mini-sell-offs, is now doing anything relevant the DAY BEFORE NFP, then I'm not doing my job... TOMORROW is the "
Bert Swyers  :  "i am 1.25 off from mondays highs"
Bobby Kurpinsky  :  "yeah, pricing from monday is about .75% srp worse on my sheets"
Gus Floropoulos  :  "i think we all need some type of outlook"
Terry Colabrese  :  "Thanks for the excellent commentary you just posted, AQ! I appreciate the Plain and Simple, for that's who I am!"
Victor Burek  :  "i agree stocks will probably pull back.. but will the money find its way to tresuries and mbs?"
JTB  :  "Vic..You may be right about the positive economic news, but there has to be a pull back coming. Look at this S&P chart since Sept...It's basically gone straight up. Anyone think this continue. http://www.bloomberg.com/apps/quote?ticker=SPX:IND"
Mike Drews  :  "hey now, we're only down -05...this almost feels like a facemelter to me."
Victor Burek  :  ".125 better"
Victor Burek  :  "flagstar reprice"
John Rodgers  :  "you got that right."
Adam Quinones  :  "LOTS OF NOISE IN THE DATA"
Adam Quinones  :  " The Labor Department will also finalize its annual benchmark revisions to its payroll series, and it is expected to confirm that job losses in the 12 months to March 2010 were deeper than previously reported. The government's preliminary estimate released in October suggested the level of payrolls during the period could be revised down by 366,000. The payrolls data will also reflect a revision to the model the government uses to estimate business births and deaths. Starting with t"
Adam Quinones  :  " The private sector is again projected to generate all the jobs in January with an expected gain of 155,000, likely driven by the services sector. Payroll increases in goods-producing were likely limited by the severe weather, whose impact was probably felt the most in construction. Manufacturing employment probably grew for a second straight month. The Institute for Supply Management's measure of manufacturing employment jumped in January to its highest since April 1973. Gove"
Adam Quinones  :  " Economists estimate the weather restrained payroll growth by some 15,000 to 70,000 in January. The report on Friday will nevertheless likely confirm a gradual labor market recovery and support the Federal Reserve's intention to complete its $600 billion government bond buying program to support the economy. "
Adam Quinones  :  " The weather effect, however, might be minimized by the hiring of workers to clean up and repair damage. Following last February's blizzards, the Bureau of Labor Statistics said in order for severe weather conditions to reduce the estimate to payroll employment, employees have to be off work for an entire pay period and not paid for the time missed. Workers who received pay for any part of the reference pay period, even one hour, were counted in February's payroll employment figures. "
Adam Quinones  :  " U.S. hiring probably gathered steam in January, marking a fourth straight month of gains, but likely not enough to prevent the jobless rate from ticking up. Nonfarm payrolls are expected to have increased by 145,000 jobs, but severe snow storms that blanketed large parts of the country during the survey period could result in a much lower figure. "