MBS RECAP: Uneventful Recovery
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MBSonMND: MBS RECAP
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Pricing as of 3:59 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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3:48PM :
Bank of America $8.5 bln Mortgage Pact Challenged
(Reuters) - A group of bondholders plans to challenge Bank of America Corp's $8.5 billion settlement with holders in soured mortgage-backed securities, saying it may be unfair to other bond investors.
In court papers filed on Tuesday in New York State Supreme Court in Manhattan, 11 companies sharing the name Walnut Place said they had "serious concerns about the secret, non-adversarial, and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms."
Bank of America on June 29 announced the settlement with 22 institutional investors including BlackRock Inc, MetLife Inc, Allianz SE's Pacific Investment Management Co and the Federal Reserve Bank of New York.
That accord was part of $20 billion of mortgage-related charges that the bank said it would take, hoping to resolve much of the liability from its $2.5 billion purchase in 2008 of mortgage lender Countrywide Financial Corp.
But Walnut Place called the settlement "inadequate." It said it plans on July 13 to ask Justice Barbara Kapnick, whose approval is required for the settlement, to excuse it from the accord, or else to compel greater disclosures about the pact.
3:39PM :
First Day of the Week Hits Symbolically Equivocal Levels
In case you ever wanted a clear signal that bond markets were "on a fence" and were ready to move in either direction, today is a great example. Both MBS and 10yr Treasuries operated around their 200 day moving averages today, and at the 3pm official close, both were effectively resting on those moving averages. We had the exact mark for 10yr notes' moving average at 3.131, versus an actual 3pm yield of 3.136, and the moving average for 4.0 MBS at 100-02+ versus a 3pm price of 100-03+. Although we're not married to the idea that 200 day moving averages are great forecasting tools, both of these markets tend NOT to cross over their moving averages unless their bags are packed for an extended stay on the other side. A couple caveats here: the phenomenon is more reliably true beginning in 2009, and we couldn't consider "a few 32nds for a few days" to be an actual "crossing" event. So we're not splitting hairs about today's levels, and not at all making a case for bulls or bears. The moral of this story is that we find ourselves--as is so often the case--drifting toward another Employment Situation Report in some sort of "crossroads" territory. That much is to be expected. It's almost always a crossroads heading into NFP. The interesting layer that comes into play tonight is that of the monolithic associations that market-watchers have with the 200-day moving average. It's an almost comical cliche, reminding you what's coming up this Friday. On a serious note though, a big move on Friday could indeed mark a departure from 200-day moving averages for an extended period of time. While we'd hope that departure is in the form of higher prices and lower yields, we certainly wouldn't suggest complacency in accounting for the possibility of a move in the other direction.
2:29PM :
Moody's Cuts Portugal's Credit Rating to Junk Status
Citing growing risks that Portugal will require a second round of official financing before returning to private markets, Moody's downgraded the country's credit rating 4 notches from BAA1 to BA2. The prominent ratings agency also expressed concern that Portugal will not be able to fully achieve deficit reduction and debt stabilization targets, saying that there's an increasing probability that it will be unable to borrow at sustainable rates beginning in the second half of 2013.
1:20PM :
MBS Holding Firmly to Today's Narrow Range
The stock lever has disconnected somewhat after earlier pressuring bonds into weaker territory. Both MBS and Treasuries moved to their weakest levels of the day, but never got weaker. For Fannie Mae 4.0 MBS, that was a level of exactly PAR (100-00), and they've been between there and 100-03 ever since. 10yr yields bounced in the mid 3.15's and have been in a narrow range between there and 3.138, currently at 3.143. Volume is palpably lighter--about 2/3rds lighter-- than Friday. The lone economic report and limited excitement from headline news has kept things narrow and uneventful today, but especially uneventful compared to Friday. It's almost like markets have added another day to the long weekend. With MBS up 9 ticks on the day, these are the kinds of boring days that are just fine with us.
12:14PM :
Stock Lever Pressures Bonds Slightly Lower.
Stocks hit their lows of the day shortly after 11am but have since rallied to gain back 3/4ths of their losses since Friday's close. During that same time, 10yr yields have risen from their lowest levels of the day and MBS have fallen a few ticks from their highs. Fannie Mae 4.0's are up 8/32nds on the day now versus 11/32nds earlier. The directionality of recent movements relative to earlier trading is somewhat of a concern, but not unless 10yr yields break above their morning range. Highest yields this morning were just under 3.16 and current yield is 3.153. No cause for concern yet.
11:24AM :
New MBS Commentary Post
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard
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Adam Quinones : "yes MG the ADP report is on Thursday."
Matthew Graham : "ADP I got on the 7th, is that wrong?"
Matthew Graham : "and the addendum to that reminder is that the 10yr note gets all that special attention due to it's role as a benchmark for the broader bond market, including MBS. So in looking at things like 200 Day moving averages, we're really only doing so with our longest term outlooks in mind. There is limited to no implication for MBS in the short term, especially with NFP on the horizon."
Matthew Graham : "Just a reminder from earlier, 200 Day moving average in 10's is 3.131 today. Official close in 8 minutes and yield currently 3.1266. It's not that this is a big deal in and of itself, especially given the low-ish volume, but to whatever extent that upcoming trading is and will be motivated by quantitative models and/or technical analysis, every little bit helps. In other words, I'm not really sure that it matters too much in the big picture, but hitting 3pm under 3.131 is better than doing so"
Brett Boyke : "different day different EU country in the spotlight, Italy and Spain on deck"
Matthew Graham : "RTRS- MOODY'S SAYS INCREASING PROBABILITY PORTUGAL UNABLE TO BORROW AT SUSTAINABLE RATES IN H2 2013, AND FOR SOME TIME THEREAFTER "
Matthew Graham : "RTRS- MOODY'S SAYS PORTUGAL FACING FORMIDABLE CHALLENGES IN CUTTING SPENDING, INCREASING TAX COMPLIANCE, ACHIEVING ECONOMIC GROWTH, SUPPORTING BANKING SYSTEM "
Matthew Graham : "looks like there might not even be a head fake in that direction."
Matthew Graham : "we'll see how far 10's want to run. humongous inflection point at 3.10-3.11, not likely to break on volume. "
Matthew Graham : "RTRS - MOODY'S SAYS RISING CONCERNS PORTUGAL WILL NOT BE ABLE TO FULLY ACHIEVE DEFICIT REDUCTION AND DEBT STABILIZATION TARGETS "
Matthew Graham : "RTRS- MOODY'S SAYS GROWING RISK PORTUGAL WILL REQUIRE SECOND ROUND OF OFFICIAL FINANCING BEFORE RETURNING TO PRIVATE MARKETS "
Scott Valins : "next shoe to drop?"
Matthew Graham : "RTRS - MOODY'S CUTS PORTUGAL'S LONG-TERM GOVERNMENT BOND RATING TO "JUNK STATUS" "
Matthew Graham : "RTRS- MOODY'S DOWNGRADES PORTUGAL TO BA2 WITH A NEGATIVE OUTLOOK FROM BAA1 "
Tom Bartlett : "TY JY.thats what my QQ had..double checking, thats a good deal!"
Jason York : "1.5"
Tom Bartlett : "anyone know off top of their head what the FF for a VA putting 5% dp? 1st time bene"
John Paul Mulchay : "Same in NV Ethan"
Caroline Roy : "not here. they can contact the agents"
Ethan Brizzi : "HVCC question if anyone has insight.... Do the appraisers have to have lockbox keys for the counties that they are writing appraisals in?"
Andrew Horowitz : "and they have ratcheted down their forecast numbers to a level that couple months ago would have been very weak, and now if we beat by 20k market will take off"
Brent Borcherding : "You're not thinking buy the rumor sell the news...we've backed up a ton, MG. "
Andrew Horowitz : "Agreed MG"
Matthew Graham : "I'm fairly concerned about NFP--not that I have a prediction for it being better or worse, but simply that IF it is strong, it could do quite a bit of damage with markets at current levels (i.e. 10yr yields right on the 200 day moving average)"
Bert Swyers : "well its working in our favor right now, i truly believe by friday we are back around 3.0-3.06 after adp and nfp"
Matthew Graham : "I think we'll be lucky to hit 1 mil today."
Matthew Graham : "Friday hit 1.8 mil total"
Matthew Graham : "750k 10yr contracts so far today vs 1.1 mil by this time on Friday"
Tony Cardinal : "hey MMNJ and everybody else on the DURP FRM TO ARM, YES you can do it...you cannot do it with LP Relief. "
MMNJ : "I just checked the DURP guides with GMAC, and all I could find was that it needs to go ARM to FIXED if the payment is going up. From what I could find, as long as there is monthly tangible benefit to client (i.e. lower payment, IO to fully amortized) then fixed to ARM is OK for FAnniue DURP only"
Adam Quinones : "saw short covering early on. positive price action since 10AM data though (new longs)"
Scott Valins : "are we seeing short covering or position squaring or new longs? any volume?"
Tony Cardinal : "yea, i though FANNIE allowed FRM TO ARM, but freddie was either ARM to FRM or ARM, but not FRM to ARM."
Daniel Kramer : "tony, no, has to be same term or more conservative. For example, 5 yr arm to 7 yr arm allowed, or 5 yr io arm to 5 yr P&I arm ok too"
MMNJ : "i thought Freddie was the only one where you had to go ARM to ARM, Fixed to Fixed, or ARM to fixed -- Was not aware the Fannie has that requirement as well"
Tony Cardinal : "i have a question for anybody on a DURP: Can i go FRM to P&I ARM?"
Matthew Graham : "200 day MA for 10yr yields at 3.131. Interesting to note we've seen the thickest patch of decent volume at these technical levels and in the absence of market-moving news or events. The uptick in volume still doesn't challenge the busier parts of last week, but interesting nonetheless."