MBS RECAP: MORE SIDEWAYS
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MBSonMND: MBS RECAP
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Pricing as of 4:01 PM EST |
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard
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4:00PM :
Busiest Day Of The Econ Calendar Ahead. Can It Inspire Movement?
After 3 completely uneventful and boring market days, tomorrow brings the biggest raft of scheduled data in the hopes of giving the market something more upon which to trade. At 830am there's Durable Goods and Jobless Claims. Then 1100am brings next week's auction announcements. 1pm holds a 10yr TIPS auction, and 430pm has the usual Fed Balance Sheet and Money Supply.
3:52PM :
In Shocking Turn Of Events, MBS Doing Absolutely Nothing...
Although 10yr yields have drifted just barely out of the high side of their 3.33 to 3.35 range (3.352 at the moment), the breakout occurs after the official 3pm close, and amidst the lowest volume of the day. Even then, MBS are STILL in the same 101-28 to 101-30 range that has persisted since 11:30am.
2:40PM :
MBS Near The Highs Of Recent Range, Treasuries Still Range-Bound
In MBS, FNCL 4.5's look like they're making some sort of movement outside their recent range, now to 101-31. But with 10yr yields still over 3.33, we wouldn't get too excited about it. The market is so sideways.
2:24PM :
Bernanke says new rules benefit smaller banks
(Reuters) - New financial regulatory reforms should help reduce the edge that large banks have over smaller ones because of their implicit support from government, Federal Reserve Chairman Ben Bernanke said on Wednesday. Bernanke argued the Dodd-Frank reform legislation will address the issue of firms perceived as too big to fail by restricting their activities, raising their capital requirements and enhancing regulators' ability to wind them down. "A financial system dominated by too-big-to-fail firms cannot be a healthy financial system," Bernanke told a group of community bankers in a speech that did not touch on the broader economic outlook. "One benefit of the reforms should be the creation of a more level playing field for financial institutions of all sizes," he said. A number of other top Fed officials, including Richard Fisher, president of the Dallas Fed bank and Thomas Hoenig, president of the Kansas City Fed, have argued the legislation does not go far enough. They have called for very large banks to be broken up.
Bernanke said part of the reason the new laws governing the financial sector would support community banks was that regulators are cognizant of their concerns and challenges.
With that in mind, the Fed is aware that many community banks need time to recover from the financial crisis.
"We recognize the importance of striking the right balance between promoting safety and soundness throughout the banking system and keeping the compliance costs for smaller banking firms as small as possible," he said.
2:08PM :
MBS Bringing New Meaning To "Sideways"
How long must we endure the indecision in bond markets and specifically, the sideways slide of FNCL 4.5's centering on a price of 101-29. MBS haven't deviated more than a tick from that mark since 11:30am. Not only that, but it was also the center of yesterday's narrowing range, which even at its widest, never gapped out more than 3 ticks. Boring! 10yr yields are marching to the tune of the same drummer as they're stuck between 3.33 and 3.35. Sadly, there's nothing to report. Perhaps there are too many diverse considerations for markets to feel sufficiently motivated to do much of anything. Maybe soon.... Maybe soon...
1:32PM :
Second Layer of Benchmark Support Holds, MBS Sideways
After 10yr yields tested and broke higher past 3.34, a second and more established layer of support kicked in and kept yields under 3.35, in line with yesterday's support range. For MBS, this has resulted in FNCL 4.5's holding at or above the day's lows at 101-28. Volume and volatility have dropped off a cliff as the S&P stalls before breaking even on the day, and treasuries trade within a tight range of "flat" on the day.
12:31PM :
Benchmarks Break Short Term Support, but MBS Hold For Now
10 yr notes had been bumping up against 3.34 support over the past hour until recently breaking up to 3.35. While this violates short term support, there's a whole lot more that draws on yesterday's thick action between 3.35 and 3.36. Add to that the fact that MBS have tightened up on the sell-off and remain 1 tick over their 101-28 lows for the day. So for now, there is no ADDITIONAL reprice risk beyond that which was already mentioned at 11:18am.
12:15PM :
Dallas Fed President Nervous About QEII
(Reuters) - Dallas Federal Reserve Bank President Richard Fisher expressed concern on Wednesday about high levels of liquidity in the U.S. economy, and warned the Fed's bond-buying program set it on a "dangerous course."
Fisher, regarded by economists as one of the most hawkish policymakers at the U.S. central bank, said concern was already growing over the large amount of money in the U.S. system.
"There is an enormous amount of liquidity swashing around the U.S. economy and the U.S. financial system," he said in a speech in Berlin. The current U.S. stock market rally was the third fastest in history, he added.
Criticizing the Federal Reserve's policy of quantitative easing, Fisher equated the decision to buy $600 billion in Treasury securities with monetizing U.S. Treasury debt, and called it a "dangerous course to follow."
Fisher was a vocal opponent of the bond-buying program when the Fed began it last November, but this year has not used his vote on the Fed's policy-setting committee to oppose it. He defended that stance Tuesday in Frankfurt, saying the U.S. central bank should follow through on its promises.
The program is slated to continue through June, and Fisher has said he will oppose any extension.
11:56AM :
AIG Looks to Buyback Subprime Mortgage Bonds from Fed
(Reuters) - American International Group expects others to bid for the mortgage-backed securities that it has offered to pay $15.7 billion to buy back from the U.S. government, the insurer's chief executive told the Wall Street Journal. AIG disclosed the offer it made to the Federal Reserve earlier this month. The insurer -- which nearly collapsed in the fall of 2008 partly because of the securities -- sold the assets to the Fed as part of its bailout. In a report published in the Journal on Sunday, AIG CEO Robert Benmosche said the company understands that four banks have looked at the portfolio of assets.
He told the newspaper that at least one bid could emerge that exceeds his company's.
For more than a year, the insurer has been preparing the offer on the bonds, whose values have soared despite rising foreclosures on the underlying loans.
An index of top-rated subprime securities has rallied more than 50 percent since the depths of that market in April 2009, according to Amherst Securities Group.
The New York Fed would make a profit of about $1.5 billion on the portfolio, AIG has said.
11:49AM :
Potential Support Although Reprices Have Been Reported
After profit taking generated the recent losses in the bond market, FNCL 4.5's are still 1 tick improved on the day at 101-30 while 10yr yields are half a bp higher at 3.3317. This brings the 10yr benchmark to a pivot point around 3.33 which has seen a fair amount of action in the past few days, including this morning. It's as yet unclear which direction will get the bounce and remains a bit up-in-the-air until yields move further away from 3.33.
11:18AM :
ALERT:
Reprices Possible as Treasury Buyers Turn Sellers
The New York Fed just completed another QEII open market operation. Ahead of the scheduled coupon pass traders were seen waving in new longs (waving in = buy). We are now seeing profit taking on those positions. Rates are rising as a result which is pushing MBS prices lower. Rate sheets were fairly aggressive on first run this morning so reprices for the worse are possible.
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard
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Matthew Graham : "10's contracts just over 1 mil"
Aaron Meyer : "how about 10 yr doesn't show vol?"
Aaron Meyer : "I want to see volume how can I?"
Brett Boyke : "me article - “The housing number was a disaster. We were expecting nothing of the housing market over the course of this winter, so it doesn’t matter to me if this number was 250, zero or 300,000. But the market is still reacting in knee-jerk fashion that this number was as ugly as it was,” Orlando said.
Data on the housing market should improve this summer, “when people have a better sense of the employment market,” he added.
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Brett Boyke : "from MW: “After the market got over the weaker-than-expected new-home sales, the bounce-back attracted some buying,” noted Elliot Spar, market strategist at Stifel Nicolaus & Co.
“It’s one of those days where if you show me a negative, I can show you a positive,” Spar added.
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Matthew Graham : "might as well not even look at 5's and 5.5's"
Matthew Graham : "amen to that"
Andrew Horowitz : "not much volume behind the buying in the 5 and the 5.5 ENG"
ENG : "buying higher coupons doesn't seem like a good indicator. AH, what do you think?"
Bernie : "GMAC about 20 bps worse"
Bernie : "GMAC reprice--worse"
Matthew Graham : "MBS look to be fearing the consensus of a benchmark back up to 3.38/3.40 10yr and doing some preemptive convexity selling"
Andrew Horowitz : "the 4 is the playground of the trader"
Bert Swyers : "4.0 takin a beating"
Andrew Peterson : "53 reprice"
Alan Craft : "NYCB worse"
Victor Burek : "flagstar worse"
Matthew Graham : "dow just turned positive, S&P not yet"
Matthew Graham : "Bernanke talking about debit card interchange fees and Basel"
Matthew Graham : "still, could create pressure for MBS"
Matthew Graham : "good call bert. "uh oh" part is TBD though"
Bert Swyers : "uh oh support broken"
Adam Quinones : "http://www.mortgagenewsdaily.com/mortgage_rates/blog/203989.aspx"
Adam Quinones : "and make sure you read the content we put on the blog yesterday"
Adam Quinones : "dont overthink this market."
Adam Quinones : ""tactical""
Adam Quinones : "moderate activity..mostly directional"
Adam Quinones : "profit taking. general uncertainty"
Jason Sheaffer : "why are we selling off? housing data was terrible."
Aaron Meyer : "I predict 102.03 at close"
Oliver S. Orlicki : "and they just sent rates out 25 minutes ago"
Oliver S. Orlicki : "icon reprice"
Bernie : "PF reprice -.125"