MBS RECAP: Off Best Levels of the Day

Stocks are charging hard off the lows. The S&P is now at 1313.95 after being as low as 1304 today. This has 10yr yields on the rise, currently at 3.518. FNCL 4.5's aren't weakening quite as quickly as treasury benchmarks, but it's down enough (101-24) that some lenders might reprice for the worse, or recall an earlier reprice for the better.

*** U.S. JAN CONSUMER CREDIT RISES $5.01 BLN (CONSENSUS RISE $3.90 BLN) VS REVISED $4.09 BLN INCREASE IN DEC *** OVERALL U.S. CONSUMER CREDIT RISES FOR FOURTH STRAIGHT MONTH *** CREDIT CARD SPENDING RISES FOR FIRST TIME SINCE FINANCIAL CRISIS. *** CONSUMER BORROWING 6.6% LOWER THAN 2008 HIGH. *** REVOLVING DEBT FELL6.4% (28TH DECLINE IN 29 MONTHS). Student and automobile loans contributed the most to the expansion of credit.

Earlier, it looked as if stocks may have put in their lows of the day, and indeed that was the case. With a connected stock lever, this has resulted in some weakness for bonds, but nothing severe. 10yr notes are at 3.50 at the moment and have put in a few good support bounces near there. FNCL 4.5's have given up a few ticks and now sit at 101-27, 1 tick up on the day. Reprices for the better are still possible, but less likely than they were when FNCL's were near 102-00.

For perhaps the first time today, the S&P has shown signs of putting a stop to its sell-off with current levels at 1307, off lows in the 1304's. During this same time 10yr yields have risen from 3.473 to 3.50 and FNCL 4.5's have come off 102-00 highs to 101-29. This is 3 ticks up on the day and while it does still leave the door open for ongoing reprices for the better, it's less of a bullish environment than pre-1pm trading.

FNCL 4.5's aren't merely holding near some of the highest prices in a month--102-00--but are doing so with minimal volatility. A range of 101-29 to 102-00 has contained almost all ticks for the past two hours. Good prices and good stability are normally good for reprices for the better. We've seen quite a few and in some cases, more than one from the same lender. 10yr notes are at 3.479 and the S&P is at 1306.22, 15 pts down on the day.

FNCL 4.5's are hovering around 101-30 at the moment, which although only 3 ticks up on the day, is close to the highest prices seen in nearly a month (102-00 on 3/1). 10yr notes got over their unwillingness to chase the stock lever lower and are now down to 3.477. A few reprices for the better have come across and if current MBS prices hold, expect other lenders to get on board with that, unless they priced after 11am eastern.

*** FED'S EVANS-OIL PRICES HEADWIND FOR REAL ECONOMY-CNBC *** FED'S EVANS-UNEMPLOYMENT RATE DECLINE A SIGNAL LABOR MARKET IS IMPROVING-CNBC *** FED'S EVANS-CONTINUE TO THINK HURDLE HIGH TO ALTERING $600 BLN BOND BUYING PROGRAM *** FED'S EVANS SAYS DOES NOT SEE NEED FOR TAPERING ASSET PURCHASES

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With almost a 5 tick gap between current MBS prices and those from earlier this morning, it's possible we may see a few reprices for the better from fast-acting lenders. The line in the sand between "earlier this morning" and "now" is around 10:30am. Prices were hovering around 101-23 then and are currently 101-28. 10yr yields are also at their best levels of the day at 3.497, roughly unchanged from Friday's 5pm marks. Stocks meanwhile, continue to push lower, now at 1310.56 in the S&P, which puts current levels below Friday's worst levels. The stock lever has been mostly connected this morning, but on a relative basis, treasuries seem to be resisting keeping the same pace with stocks as they had been this morning.

"Readers need to be sure that they do not confuse risk retention and QRM. Risk retention is the requirement for securitizers, and perhaps originators, to retain a portion of every loan that backs a security that is sold into the capital markets. QRM is an exemption from risk retention. So to say that mortgage brokers will not be subject to QRM is simply incorrect. If mortgage brokers want to originate loans that are exempt from the risk retention requirement, the loans they originate will have to conform to the QRM regulations that will be issued by a joint group of six regulators -- the OCC, FDIC, Federal Reserve, HUD, FHFA and the SEC." So wrote Glen Corso with the Community Mortgage Banking Project.