MBS RECAP: Scattered Reprices Reported

(Washington Post) - The share of renters who spend more than half their income on housing is at its highest level in half a century and it’s no longer just low-income tenants who are feeling the pain, according to a Harvard University study scheduled for release Tuesday. About 26 percent of renters — or 10.1 million people — spent more than half their pre-tax household income on rent and utilities in 2009. That’s because incomes slipped dramatically from their peak at the start of the decade even as rents kept rising. The study offers the latest in a series of grim statistics about the scarcity of rental housing, especially for the working poor. The supply has not kept up with demand in part because of a shortage of apartments, a key source of new rentals. Developers cut back on such projects when the economy deteriorated in 2009, which drove down vacancies and boosted rents. Analysts say they expect rents to keep climbing as developers try to ramp up new projects and catch up with demand. In many areas, the demand is driven by families who lost their homes to foreclosure during the housing bust and ended up searching for rentals. Meanwhile, as the job market recovers, more newly employed young adults appear to be seeking their own apartments instead of living with their parents, putting even more upward pressure on rental rates, according to one of the study’s researchers. Ideally, renters should not spend more than 30 percent of their income on housing, the study said MND wrote a story on this topic last January. READ MORE: http://www.mortgagenewsdaily.com/channels/voiceofhousing/129657.aspx

Earlier we noted: "If benchmark TSYs get no lower than the 3.31's today, and no higher than 3.34 support, it's likely that MBS will keep this 102-12 to 102-16 range. " Interestingly enough, it was only moments after 10yr notes ticked down to 3.309 that FNCL 4.5's broke higher, hitting 102-17. Due to MBS making the expected move in relation to benchmark guidance givers, there's really not much of an implication here other than the fact that TSYs are rallying on massive short-covering/forced buying, and MBS are lagging. Reprices for the better continue to be a possibility, especially among lenders who have not yet released any. However, we're running into the last vestiges of MBS prices that can coincide with 4.875% Best-Ex rates and thus the production MBS community should prove to be increasingly hesitant to play ball with trading activities that put prices high enough motivate a shift in production to the 4.0 coupon. It's not that this CAN'T happen, it's just that IF IT DOES, sustaining the move will be an ongoing process requiring lots of confirmation.

(HUD) - Today, the U.S. Department of Housing and Urban Development announced that more than a thousand extremely low-income persons living with HIV/AIDS will continue to receive permanent housing as a result of $23 million in grants. During each of the next three years, this HUD funding will help provide permanent supportive housing for 1,015 households so they can manage their illnesses while receiving critically needed support services. The funding announced today is offered through HUD’s Housing Opportunities for Persons with AIDS Program (HOPWA) and will renew HUD’s support of 22 local programs in 18 states (see attached chart and individual project descriptions below). “These grants are a vital source of support to the local programs that are on the ground working to keep families healthy,” said HUD Secretary Shaun Donovan. “Knowing that you have a place to call home can make all the difference to the well-being of families living with HIV/AIDS, many of whom have been on the brink of homelessness.”

Although prices of FNCL 4.5's got as high as the 102-20's during the flight-to-safety rally surrounding the crisis in Japan, the most frequently recurring technical level was 102-16. The rally, at that time, ultimately consolidated its trading pattern around 102-14. This might not be that different from what we're about to see this afternoon as the 102-16 level has already provided several noticeable bounces. On the lower side, 102-12 has been supportive today. If benchmark TSYs get no lower than the 3.31's today, and no higher than 3.34 support, it's likely that MBS will keep this 102-12 to 102-16 range. 10yr notes are currently at 3.324, nearly 4 bps lower on the day. Reprices for the better have been reported, but not with unanimity yet. That should come with additional time spent at or near these levels, and the chances would decrease if prices dip below 101-12, or look like they're headed that way.

FNCL 4.5's are rallying into new highs, currently up 7 ticks on the day at 102-16. These are also the highest prices since 3/17, and factoring out the Japan-related FTS, the best levels since mid-January. 10yr yields have also fallen to their lowest levels of the day at 3.32. Current price levels suggest reprices for the better. Only exception would be a rapid retracement back below previous highs around 102-14.

* U.S. SELLS $35 BLN 2-YEAR NOTES AT HIGH YIELD 0.673 PCT, AWARDS 79.79 PCT OF BIDS AT HIGH * U.S. 2-YEAR NOTES BID-TO-COVER RATIO 3.06, NON-COMP BIDS $310.70 MLN * US TREASURY - PRIMARY DEALERS TAKE $16.92 BLN OF 2-YEAR NOTES SALE, INDIRECT $13.13 BLN