MBS RECAP: Payroll Forecasts Cut

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MBSonMND: MBS RECAP
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FNMA 3.5
97-16 : +0-29
FNMA 4.0
101-11 : +0-23
FNMA 4.5
104-12 : +0-18
FNMA 5.0
106-27 : +0-14
GNMA 3.5
98-28 : +0-28
GNMA 4.0
103-04 : +0-23
GNMA 4.5
106-09 : +0-20
GNMA 5.0
108-21 : +0-13
FHLMC 3.5
97-10 : +0-29
FHLMC 4.0
101-08 : +0-24
FHLMC 4.5
104-08 : +0-17
FHLMC 5.0
106-22 : +0-13
Pricing as of 3:58 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
3:10PM  :  Payroll Forecasts Slashed After Poor ADP Print
(Reuters) - Goldman Sachs, along with several other large financial institutions, on Wednesday cut their estimates for non-farm payrolls growth in May after ADP Employer Services reported much lower-than-expected growth in private payrolls last month. Goldman cut its estimate and said employers added 100,000 jobs in May, down from an original estimate of 150,000 added jobs. The consensus estimate was also cut by the economists surveyed by Reuters: RTRS- ECONOMISTS LOWER FORECAST FOR U.S. NONFARM PAYROLLS INCREASE TO 150,000 IN MAY FROM 180,000 PRE-ADP. The government will release May non-farm payrolls and unemployment data on Friday morning. (Reporting by Chris Reese; Editing by Dan Grebler)
3:07PM  :  Profit Taking Seen. Lock Desks Await Loan Supply
Trading activity in both benchmark Treasuries and production MBS coupons has tapered off as we creep closer to market close. Day trader profit taking has been the main motivation in the afternoon session. The resulting impact on price levels has however been minimal as a steady bid remains in place from interested buyers and dealers. Booking short-term gains is not an unexpected event and shouldn't viewed as an indication of a bearish bias in the bond market. It is actually quite healthy to see profits being taken at rally extremes. The underlying tone of a weaker economic outlook (we've called it a "false start") remains in place which supports the recent "flight to safety" into government guaranteed TSYs and higher-yielding MBS coupons. Focusing in a bit more on the expected impact on the loan pricing, there has been minimal activity in the secondary market today that would imply lock desks are shifting their hedging strategies to MBS coupons that which would allow for a faster decline in mortgage rates (4.0 30yr MBS). Once we see secondary moving "down in coupon" with their hedges, we will be quick to alert rate-watchers of the pending transfer of the "Production Coupon Title Belt" to 30yr 4.0 MBS.. This event is more likely to occur on Friday morning after the Employment Situation Report. Beyond the technicalities of rate sheets, loan pricing is extremely aggressive. C30 Best Execution has fallen to 4.50%. Maybe the reason we're not seeing more loan supply is because refinance demand just isn't what it used to be. READ MORE: http://www.mortgagenewsdaily.com/06012011_mba_applications.asp
12:33PM  :  Fed's Pianalto: Labor markets have long way to go
(Reuters) - High U.S. unemployment is not a "quickly resolvable problem" but April's job gains show the economic recovery is on a firmer footing, a top Federal Reserve policymaker said on Wednesday. "We've got a long way to go before labor markets can be described as healthy again," Cleveland Federal Reserve Bank President Sandra Pianalto told the Columbus Metropolitan Club. "Recent gains in the labor market suggest that the economy is on (a) firmer footing and that the recovery is likely to continue. However, growth may be frustratingly slow at times," she said. At its last policy-setting meeting, the Fed signaled its $600 billion bond buying program would end as planned in June, while also stressing it was in no rush to raise interest rates. The Fed has kept interest rates at record lows near zero since December 2008. Pianalto said she expects inflation to fall back below 2 percent in the next couple of years and that it could take about five years for the jobless rate to reach its long-run sustainable rate of 5.5 to 6 percent. Given that backdrop, she said, current monetary policy is appropriate. Pianalto's views tend to hew closely to those of Chairman Ben Bernanke and the center of the Fed's policy-setting committee. (Reporting by Kristina Cooke, Editing by Chizu Nomiyama)
12:22PM  :  ALERT: Positive Reprices Reported. Stock Lever Adds Momentum
Multiple reprices for the better have been awarded by lenders as "rate sheet influential" MBS prices continue to set new 2011 price highs. C30 Best Execution is now 4.50% as the Fannie Mae 30yr 4.0 MBS coupon has crossed deep into the 101 price handle thanks to further gains in Treasuries, which have now drifted down to 2.95%. Meantime, related markets are tanking. The S&P just made a leap lower and is currently down 1.53% on the day thanks to a 1.35% decline in oil prices. The stock lever is clearly adding momentum to this rates rally.
11:38AM  :  Loan Pricing: BestEx Improves. Wall Wavering
C30 loan pricing is 30.7bps better on average this morning with the largest rebate improvements seen in note rates below 4.625%. Although some lenders may be withholding overage to manage fallout and reduce hedging costs, Best Execution looks to have improved to 4.50% after "rate sheet influential" MBS coupons set new 2011 price highs today. We'd expect loan pricing to continue improving on Friday if the official jobs report disappoints the market. This would provide confirmation that "The Wall", which has prevented mortgage rates from making larger strides lower, has indeed been toppled.
11:18AM  :  New MBS Commentary Post

Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Rick James  :  "FYI for anyone that could use it- HCBS has a "subordination hotline" call this #, 630-617-6604, follow the instructions, and they'll fax over their subordination requirements. Ran into the need for this on two files I thought were DOA, may be some life left in them afterall!"
Jason Wilborn  :  "Downgrades. QE3 (a third round of quantitative easing) is coming,” said Maughn. “The bond markets are all smarter than us, and that’s exactly what the bond markets are telling me.” "
Brent Borcherding  :  "That was with Wells."
Brent Borcherding  :  "56.8 on a NOO"
MMNJ  :  "GMAC I believe caps at 50% DTI on DURP regardless of findings -- but that may have changed"
Jill Statz  :  "have you ever had one of 50% dti though?"
Adam Quinones  :  "RTRS - REUTERS POLL - ECONOMISTS LOWER FORECAST FOR U.S. NONFARM PAYROLLS INCREASE TO 150,000 IN MAY FROM 180,000 PRE-ADP "
Brent Borcherding  :  "As high as is accepted by DU...I haven't had any lenders not accept a DURP that is A/E."
Jill Statz  :  "from what I am seeing right now around a 56% dti...will any lender accept that with a A/E findings?"
Steven Bote  :  "What dti are you trying to go up to?"
Jill Statz  :  "what is the highest dti that you can go to on an DURP loan?"
Ken Crute  :  "kinda strange how volume is, 6 lo's in my office 5 of us are getting by, 1 still closing $2.5 mil a month, seems the same in a lot offices "
Timothy Baron  :  "Nice rates. Wish I had something to lock right now."
Caroline Roy  :  "dying to take some apps right now!!"
Chris Kopec  :  "I'm about 26 bp from streaking through the Quads."
Ross Weinstein  :  "wells repricing now"
Victor Burek  :  "flagstar better"
BVG  :  "InterBank better"
Victor Burek  :  "plaza better"
Dan Clifton  :  "+.125 from pfg"
Matt Hodges  :  "GMAC rp 1:00"
Chris Kopec  :  "“A lot of the real-money accounts who have not been involved have been caught off guard,” said Thomas Tucci, head of U.S. government bond trading in New York at Royal Bank of Canada’s RBC Capital Markets unit, one of 20 primary dealers authorized to trade directly with the Federal Reserve. “They will have to purchase securities out at the longer end of the yield curve to meet portfolio needs.” http://noir.bloomberg.com/apps/news?pid=20602007&sid=az.CqPRPGUi0"
Jeff Anderson  :  "Definite market there. I've done more 203k's in the last 6 mos than in my first 6 years in this industry. Great product. The investor option would be great."
Ira Selwin  :  "Don't forget 203k you can do mixed use"
Adam Quinones  :  "i know 203(k)'s are horrible to deal with...but one could make a market here if they became 203(k) experts"
Adam Quinones  :  ""With so many foreclosed properties sitting empty on the market we can expect remodeling and rehabbing to be a leading indicator of a bottom in the housing market", says MND's Managing Editor Adam Quinones. "We already know there is dearth of affordable rental housing available to low income renters. From that perspective, FHA should open its 203(k) program to investors if they want to accomplish their affordable housing goals.""
Adam Quinones  :  ""Take note of HUD-sponsored initiatives aimed at rebuilding America's dilapidated housing stock." says MND's Managing Editor Adam Quinones. "This is where housing professionals will find the most opportunity in years ahead. The FHA should reopen the 203(k) program to investors if they want to encourage private investment in the U.S. housing market.""
Adam Quinones  :  "these are quotes we've used in previous stories re: 203(k) deals..."
Adam Quinones  :  "Plain and Simple: Besides private residential spending, all aspects of this report indicated a decline in construction outlays in the month of April. Check out the table above to see it with your own eyes. With Housing Starts down 10.6% in April, the only logical explanation for this jump in residential construction spending is an uptick in rehab and renovation projects. HOW DO WE COME TO THAT CONCLUSION? Housing Starts data estimates how much new residential real estate construction occurred in"
Adam Quinones  :  "quick note re: 203(k) loans: From: Rehab and Remodeling Boosts Construction Spending in April: http://www.mortgagenewsdaily.com/06012011_construction_spending_april.asp"
Jeff Anderson  :  "GMAC just repriced. Low and behold there's a 4.00 rate on there. "
Matthew Graham  :  "several of these analysts had notes out last night indicating they would revise forecasts lower if ADP missed"
Matthew Graham  :  "you'd be astonished to look at a long term overlay of the two."
Mike Drews  :  "GMAC reprice"
Matthew Graham  :  "Yes, this can be a wildly inaccurate short term indication of the impending NFP, but in the long term, they correlate fairly well, so markets generally have to take any huge deviations seriously. "
Matthew Graham  :  "read last night's last live update Jeff"
Jeff Anderson  :  "I'm kind of chuckling that anyone is changing their forecast based on ADP. They've been so accurate. (Sarcasm inserted once again.)"
Brett Boyke  :  "Goldman lowered from +150K to +100 as well"
Jason York  :  "looks like GMAC is repricing"
Brett Boyke  :  "from ZH -Deutsche Bank's Joe LaVorgna just cut his NFP estimate from 300,000 to 160,000 in two days. From yesterday: "Our preliminary estimates were for +300k on payrolls and a three-tenths decline in the unemployment rate to 8.7%. However, in light of the softer tone of the data—particularly the inability of initial jobless claims to recover below 400k—we trimmed our projections. We lowered our May payroll estimate to +225k and raised our unemployment rate target to 8.9%." And from 10 minutes a"
Jill Statz  :  "FAMC 2nd reprice for the better"
Jill Statz  :  "Wells, AFR and M&I reprices for the better"
Steven Bote  :  "MSI reprice"
Adam Quinones  :  "we dont see major convexity buying until C30 mortgage rates reach 4.25%"
Adam Quinones  :  "F2 status..winds not strong enough yet. As MG said, we'll need data on Friday to confirm econ weakness. "
B-C  :  "what about the convexity vortex Aq?"
Adam Quinones  :  "we're looking to confirm a shift "down in coupon" which will confirm a toppling of "The Wall" that is preventing mortgage rates from making bigger strides "
Matthew Graham  :  "need Friday for confirmation of whatever it is we're confirming"
Matthew Graham  :  "overall anyway, haven't checked up on MBS in a few"
Matthew Graham  :  "volume is out of control gus"