MBS RECAP: 9/1/2011

By: Matthew Graham
MBSonMND: MBS RECAP
Open MBSonMND Dashboard
FNMA 3.5
101-06 : +0-17
FNMA 4.0
104-04 : +0-14
FNMA 4.5
106-01 : +0-09
FNMA 5.0
107-30 : +0-06
GNMA 3.5
102-29 : +0-21
GNMA 4.0
106-09 : +0-15
GNMA 4.5
108-19 : +0-12
GNMA 5.0
110-11 : +0-08
FHLMC 3.5
101-01 : +0-17
FHLMC 4.0
103-31 : +0-13
FHLMC 4.5
105-27 : +0-10
FHLMC 5.0
107-21 : +0-05
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 .
11:27AM  :  ALERT: Rallying Back to Highs of the Day as Stocks go Red
Perhaps it was the fact that the internals of the ISM report were weaker than the headline and the street took some time to realize it. Perhaps it was the fact that the ISM report being stronger than expected caused the street to trim expectations of QE3. Or perhaps this is merely a technical correction from last night's and this morning's lows (recent lows in S&P's fell along that same line). But whatever the case, stocks are down to 1218 in the S&P and have been in the red for about half an hour (currently hovering around unchanged. Bonds like it. 10's are down 4.7 bps on the day now at 2.1864 and Fannie MBS are improved. 4's are up 7 ticks at 103-30 and 3.5's are up 10 ticks at 100-31+. This morning's action reiterates a common theme though, and that is that the bond market is paying attention to stocks. If Stocks manage to stage an afternoon rally, we could lose recent gains. But until that happens, risks of reprices for the worse are gone and it would only be a matter of time (or further gains) before reprices for the better become the more likely event.
11:17AM  :  New MBS Commentary Post
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Adam Quinones  :  "FYI - U.S. TREASURY STILL HAS $71.4 BLN OF PRINCIPAL OUTSTANDING IN MBS PORTFOLIO FROM ORIGINAL INVESTMENT OF MORE THAN $225 BLN - RTRS"
Michael Kelleher  :  "AQ and especially MG lately, you guys are the best, you give us so much more clout then those who don't use you. what is the best way to thank you, sign up for the platinum membership? "
Dirk Postupack  :  "5/3rd re-price for better"
Andrew Horowitz  :  "ding ding ding"
Adam Quinones  :  "so it's really a matter of BestExecution vs. Rush to Deliver"
Adam Quinones  :  "seems like desks are trying to fill buckets/previous trades."
Adam Quinones  :  "i see big buydown from 4.375 to 4.25 in FN/FGs"
Adam Quinones  :  "no matter what...GSEs must get 0.25% g-fee."
Adam Quinones  :  "it doesnt"
Gaius Rossini  :  "i'm still confused, how does 4.25 correspond to a 4.0 TBA"
Brett Boyke  :  "from Goldman- "ISM stronger than expected in August, although details of the report are softer than the headline suggests...We are lowering our forecast for tomorrow's nonfarm payroll report to +25k, from +50k previously. The main reason is the accumulation of evidence of weak hiring in late July and August: a sharp deterioration in perceptions of job availability in the latest Conference Board survey, a drop in today's ISM manufacturing employment index, another drop in job advertising, and a "
Jason York  :  "I have a feeling Wells will hold out until late in the day unless we break the sideways action"
Victor Burek  :  "flagstar better"
Adam Quinones  :  "GOS = gain on sale"
Adam Quinones  :  "Tighter primary/secondary spreads Joe. Wider BE/Mand spread means more margin baked into rate sheets. Less spread = smaller GOS to desk, but investor still gets 4.0%cpn."
Adam Quinones  :  "when taking into consideration the orig/hedging flows into 4.0s we cant forget that some desks play the roll, others swap "down or up in coupon", some push the paper right to the servicer portfolio to add duration/hedge against prepays."
Joe Ridings  :  "ok so now that makes sense. why then a few years ago the spread seemed smaller, higher yeild to investor?"
Adam Quinones  :  "so take a 4.375% note rate, give .25% to GSEs and that only leaves 0.125% for the servicer."
Jason York  :  "plaza improvement"
Adam Quinones  :  "well the investor is expecting a 4.0%cpn payment and the servicers wants to get paid too and we can't forget the GSEs/FHA who need their credit guarantee fee......"
Adam Quinones  :  "GN and FN/FGs"
Joe Ridings  :  "why do they correlate that way?"
Adam Quinones  :  "Orig has flowed into 4.0 coupons over the past few days. "
Adam Quinones  :  "Ira....buyers MIA yesterday. dealers got stuck with extra supply. "
Steve Chizmadia  :  "4.125 correlates to the 3.5 coupon"
Steve Chizmadia  :  "Because 4.25 correlates to the 4 coupon"
Ira Selwin  :  "why such a big price jump from 4.125 to 4.25"
Ira Selwin  :  "Who knows what the liquidity is in the ginnie 3.5's ?"