MBS MID-DAY: Chopping Lower

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MBSonMND: MBS MID-DAY
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FNMA 3.5
94-04 : -0-03
FNMA 4.0
98-09 : -0-04
FNMA 4.5
101-22 : -0-02
FNMA 5.0
104-17 : -0-02
GNMA 3.5
95-06 : -0-03
GNMA 4.0
99-27 : -0-02
GNMA 4.5
103-01 : -0-03
GNMA 5.0
105-30 : -0-02
FHLMC 3.5
93-30 : -0-04
FHLMC 4.0
98-03 : -0-05
FHLMC 4.5
101-16 : -0-03
FHLMC 5.0
104-09 : -0-02
Pricing as of 11:01 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
10:41AM  :  MBS at the Lows of the Morning. Reprice Risk Lies Below
FNCL 4.5's are now down to the key pivot point at 101-20, which is 4 ticks lower day over day. Although technicals and our connectedness to benchmarks which have not yet seen their lows today would indicate a bounce, just be aware that if we move UNDER 101-20, reprice risk will have risen. Until then, we're just sideways into the auction until further notice.
10:15AM  :  Stocks Shrug Off Data and Downgrades, Bonds Weaken
Stocks had already put in a supportive bounce before the release of the Consumer Confidence data. The stock lever stayed strongly connected during that time and 10yr yields bounced just under 3.43. Following confidence data, stocks shot fairly quickly back into the green with the S&P at 1310.68 currently. 10's didn't follow the same pace, but are still up to 3.446, about mid-range for them. FNCL 4.5's are down 2 ticks from their 101-24 highs, now at 101-22, and are the "most sideways" of the three.
10:03AM  :  RISK RETENTION VOTE LOOMS
*** FDIC BOARD SET TO VOTE ON RISK RETENTION PROPOSAL TUESDAY MORNING *** DODD-FRANK LAW REQUIRES SECURITIZERS TO RETAIN 5 PERCENT OF CREDIT RISK OF SECURITIZED LOANS *** U.S. REGULATORY STAFF RECOMMENDS RISK CAN BE RETAINED IN VERTICAL OR HORIZONTAL SLICE OR A COMBINATION OF BOTH *** REGULATORY STAFF RECOMMENDS LOANS FOR HOME PURCHASES CAN BE EXEMPT FROM RISK RULE IF THERE IS 20 PCT DOWN PAYMENT *** BORROWER HOUSING COSTS CANNOT EXCEED 28 PCT OF GROSS INCOME ON MORTGAGES EXEMPT FROM RISK RULE-STAFF RECOMMENDATION *** MORTGAGES PURCHASED BY FANNIE MAE, FREDDIE MAC WOULD BE EXEMPT FROM RISK RETENTION REQUIREMENTS-STAFF *** HOW LOANS PURCHASED BY FANNIE, FREDDIE ARE TREATED WILL BE REVISITED WHEN THEY ARE NO LONGER CONTROLLED BY GOVT-STAFF *** AUTO, COMMERCIAL, COMMERCIAL REAL ESTATE LOANS EXEMPT FROM RISK REQUIREMENT IF THEY MEET CERTAIN UNDERWRITING STANDARDS-STAFF *** FDIC BOARD ALSO SET TO CONSIDER LIVING WILL RULE THAT IS PART OF NEW LIQUIDATION AUTHORITY
10:01AM  :  DATA FLASH: Consumer Confidence 63.4 vs 72.0 in February
*** MARCH CONSUMER CONFIDENCE INDEX 63.4 VS FEBRUARY REVISED 72.0 (PREVIOUS 70.4) - CONFERENCE BOARD *** CONSUMER CONFIDENCE INDEX MEDIAN FORECAST FROM REUTERS FOR MARCH WAS 65.0 *** CONSUMER PRESENT SITUATION INDEX IN MARCH 36.9 VS FEBRUARY REVISED 33.8 (PREVIOUS 33.4) *** CONSUMER EXPECTATIONS INDEX 81.1 IN MARCH VS FEBRUARY REVISED 97.5 (PREVIOUS 95.1) - CONFERENCE BOARD *** JOBS HARD-TO-GET INDEX 44.6 IN MARCH VS FEB REVISED 44.4 (PREVIOUS 45.7) - CONFERENCE BOARD *** 1-YEAR CONSUMER INFLATION RATE EXPECTATIONS 6.7 PCT IN MARCH VS FEB 5.6 PCT (PREVIOUS 5.6)
9:49AM  :  S&P Downgrades Portugal's and Greece's Sovereign Debt Rating
*** S&P LWRS PORTUGAL TO BBB-/A-3;OTLK NEG;TELCON TODAY, 4.30PMBST *** S&P CUTS SOVEREIGN CREDIT RATINGS OF PORTUGAL TO 'BBB-/A-3' FROM 'BBB/A-2'. *** S&P SAYS REMOVES PORTUGAL'S RATINGS FROM CREDITWATCH NEGATIVE *** S&P CUTS GREECE'S RATING TO TO 'BB-' FROM 'BB+' *** S&P SAYS MAY FURTHER CUT GREECE'S 'BB-' RATING *** S&P SAYS COULD CUT GREECE'S RATING BY ANOTHER ONE OR TWO NOTCHES IF FISCAL POSITION WORSENS
9:42AM  :  Weak Stock Market Open Coaxes Yields Lower
With an auction on the horizon today, and the potential concessionary selling that may or may not precede it, we don't know if this will continue to be the case all morning, but for now, the stock lever is intact and helping... S&P's are nearly 3 pts down at the open, and in that same time, 10yr yields have fallen 3.464 to 3.442. MBS have responded favorably as well with FNCL 4.5's moving from their lows of the morning at 101-21 up 2 ticks to 101-23. One might assume that continued stock losses are a net positive for bond prices, but if stocks REALLY plummet for some reason, bonds might disconnect with the 1pm auction in mind.
9:03AM  :  Regulators to Set Rules on Mortgage Securities
Banks will be forced to retain some risk when they securitize all but the most conservative mortgages under rules that regulators are expected to vote on Tuesday. But the banks are likely to be given wide leeway in determining what risks to keep. Major banks, hoping to revive the mortgage securitization market that crumbled when many securitizations proved to be anything but safe, had asked regulators to define almost any mortgage — except for the most extreme types no longer being written anyway — as a “qualified residential mortgage.” But a summary of the proposal, provided to The New York Times on Monday night by a person briefed on the decision, showed that the regulators rejected that advice and decided that only the most conservative mortgages would qualify. Securitizations of any other mortgages would require the banks to retain “skin in the game” of at least 5 percent of the risk. FULL STORY: http://www.nytimes.com/2011/03/29/business/29bank.html
9:02AM  :  DATA FLASH: Case Shiller Home Prices Fall For 7th Month in a Row
*** JAN HOME PRICES IN 20 METRO AREAS -0.2 PCT SEASONALLY ADJ (CONSENSUS -0.4 PCT) VS -0.4 IN DEC -- S&P/CASE-SHILLER *** JANUARY 20-METRO AREA HOME PRICES -1.0 PCT (CONSENSUS -1.0) VS -1.0 PCT IN DEC--S&P/CASE-SHILLER *** JANUARY 20-METRO AREA HOME PRICES -3.1 PCT (CONSENSUS -3.2 PCT) FROM YEAR AGO -- CASE-SHILLER *** JANUARY HOME PRICES IN 10 METRO AREAS -0.2 PCT SEASONALLY ADJUSTED VS DECEMBER -- CASE-SHILLER *** HOME PRICES IN 10 METRO AREAS -0.9 PCT IN JANUARY VS -0.9 PCT IN DECEMBER -- S&P/CASE-SHILLER *** JANUARY HOME PRICES IN 10 METROPOLITAN AREAS -2.0 PCT FROM YEAR AGO -- S&P/CASE-SHILLER
8:50AM  :  Rates Outlook: Tactical Ploy vs. Technical Breakdown
As a reminder, we view the latest run up in rates as being driven by a technical reversal from overbought levels followed by an auction concession driven "bid wanted" atmosphere where rates were left to drift higher with little push back from bargain buyers . While we respect the technical pressures that have been created by the directional drift, we still view them as a tactical ploy and remain optimistic about a potential turnaround as the sell-off has generally lacked participation. We are however operating from a defensive position as one day of high-volume selling could confirm a bearish technical shift and erase our optimistic gut feeling.
8:36AM  :  Bond Markets Open Relatively Flat. Waiting For Case Shiller
FNCL 4.5's are down 3 ticks at the moment at 101-22 and 10yr notes are 1.65 bps higher at 3.455. Both levels are well within yesterday's extremes as a slightly bullish set of data out of Europe is offset by fresh concerns about Japan's nuclear reactors on breaking news that radioactive water flooded a reactor tunnel. There's no economic data occupying the 8:30am time slot, but we'll get Case-Shiller home prices at 9am to better inform what seems like the current talk of the town: the potential "double dip" in housing prices.

Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Matthew Graham  :  "helping bonds"
Matthew Graham  :  "stocks down 2-3 pts so far S&P"
Adam Quinones  :  "certainly not a Fannie/Freddie wind down!"
Ira Selwin  :  "AQ - was talking about this yesterday, but didn't see you comment. With Fannie/Freddie winding down, combined with QRM, that "private money" won't be cheap. What's to come in five years?"
Adam Quinones  :  "from a legal perspective at least."
Adam Quinones  :  "indeed..the rest of the convo is really noise."
Jason York  :  "I think that is the point that they have to make AQ"
Adam Quinones  :  "i believe the important part is demonstrating irreparable harm right York? "
Jason York  :  "plus it pointed out that they don't even have the power to make this rule"
Jason York  :  "i thought it had a lot of compelling arguments and pointed out a lot of flaws that the Board used to come up with this"
Jason York  :  "anyone else read the whole lawsuit last night?"
Matthew Graham  :  "just "tapped" that level for a brief moment"
Matthew Graham  :  "keeping an eye on previous high yields at 3.459"
Matthew Graham  :  "10's breaking a bit higher"
Matthew Graham  :  "even if 10's hit 2.7 tomorrow, it wouldn't excite me about the housing market"
Matthew Graham  :  "ok, i see what you mean now... "
Aaron Meyer  :  "MG I know it did and I know you talk about it but housing nearly stopped last time it was close to 3.7, so this summer won't be a recovery"
Matthew Graham  :  "I can't help but think that that shouldn't be that unfathomable or unexpected if you've been reading our targets, etc... We talk about 3.7 quite a bit"
Aaron Meyer  :  "Some economists ae predicting 3.7 and my gut is telling my Case Shiller will be worse so rates aren't helping housing recover, even though rates are great historically speaking"
Aaron Meyer  :  "can we handle a 10 year at 3.7?"
Adam Quinones  :  "certainly an encouraging sign for our overall outlook."
Victor Burek  :  "thats good"
Adam Quinones  :  "i might set my target for after the auction process...will make it easier to avoid being let down."
Adam Quinones  :  "why today Oliver?"
Oliver S. Orlicki  :  "rally cap is on. Need to get below 3.4 today to buck this bearish trend"