MBS RECAP: 9/2/2011

By: Matthew Graham
MBSonMND: MBS RECAP
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FNMA 3.5
101-19 : +0-13
FNMA 4.0
104-11 : +0-07
FNMA 4.5
106-03 : +0-01
FNMA 5.0
107-29 : -0-01
GNMA 3.5
103-08 : +0-09
GNMA 4.0
106-18 : +0-09
GNMA 4.5
108-22 : +0-03
GNMA 5.0
110-12 : +0-01
FHLMC 3.5
101-10 : +0-10
FHLMC 4.0
104-07 : +0-07
FHLMC 4.5
105-28 : +0-01
FHLMC 5.0
107-23 : +0-02
Pricing as of 4:02 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
3:17PM  :  ALERT: MBS Close at Session Highs. Pricing Spreads Widen
After spending most of the session trending lower from a post-jobs-data bond market rally, the Fannie Mae 4.0 has found support at 104-08 and is heading into the 3pm close near its session highs. Triggered by weakness in stocks, this positive development has erased the outside chance that lenders might recall and reprice for the worse. Don't hold your breath for a reprice for the better either, lock desks are likely to keep pricing strategies conservative heading into the long-weekend, especially with benchmark rates already testing record lows. Secondary managers will be looking for proof that new record high MBS prices are even possible before offering more aggressive BestExecution quotes and cheaper buydowns. No reason spook the herd within your "committed pipeline" on a Friday afternoon when the rally might already be baked into valuations.
11:22AM  :  New MBS Commentary Post
11:20AM  :  ALERT: Bond Markets Testing Weakest Post-NFP Levels. Caution!
We're labeling this an alert although don't quite yet have the magnitude of losses that would motivate most lenders to reprice for the worse. This could simply be a test of the weakest post-NFP levels. 10's moved to 2.073, matching an earlier yield high at 850am. They're currently back down to 2.062... Too soon to tell how things will pan out. MBS made a similar move down to 104-06 in 4.0's and then back up to 104-09 currently. 3.5's are at 101-14. We'd actually probably be watching that 101-14 level in 3.5's today. If we move much below there, reprice risk could pick up (tip: that would make 101-12 a good price to set in your alert preferences today).
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Matthew Graham  :  "RTRS - FEDERAL HOUSING FINANCE AGENCY SUES BANK OF AMERICA'S MERRILL LYNCH UNIT OVER LOSSES ON $24.85 BLN SECURITIES "
Matthew Graham  :  "this is the same news as this morning, but now the suits have been filed"
Matthew Graham  :  "RTRS - FEDERAL HOUSING FINANCE AGENCY SUES BANK OF AMERICA CORP OVER LOSSES ON MORE THAN $6 BLN SECURITIES "
Matthew Graham  :  "RTRS - FEDERAL HOUSING FINANCE AGENCY SUES BARCLAYS OVER LOSSES ON $4.9 BLN RMBS"
Chris Kopec  :  "Flagstar worse"
Adam Quinones  :  "otherwise, lock desks will sit on their current hedges."
Steve Chizmadia  :  "That's aLOT of loans"
Adam Quinones  :  "until current pipeline of "committed loans" are closed and delivered."
Adam Quinones  :  "OR"
Adam Quinones  :  "until prices fall enough to buyback hedges..followed by a rally. "
Steve Chizmadia  :  "for how long AQ?"
Adam Quinones  :  "that means wider primary/secondary spreads are to be expected!"
Adam Quinones  :  "not sure how much got bought back over course of this week but id assume lock desks are already well-hedged."
Adam Quinones  :  "sends wrong message to "committed" pipeline?"
Christopher Stevens  :  "not liking this move lower in yield"
Andrew Horowitz  :  "University Endowments"
Adam Quinones  :  "fast$ loves total return."
Adam Quinones  :  "to a degree."
Adam Quinones  :  "index managers even."
Adam Quinones  :  "asset managers"
Andrew Horowitz  :  "CALPERS"
Adam Quinones  :  "insurance companies, pension funds, even banks who manage vs. short-end of curve."
Adam Quinones  :  "anyone who is managing cash-flows of an asset vs. those of a liability. "
Andrew Horowitz  :  "real money lost control of this market when the words "prolonged period of time " were uttrered"
Ray J  :  "who is real$"
Adam Quinones  :  "real$ has to manage discounted value of future cash flows. at all times..."
Steven Bote  :  "Ahhh always the devil's advocate, AQ..."
Adam Quinones  :  ""Trader's World""
Adam Quinones  :  "yes yes i know...lots of bond washing."
Adam Quinones  :  "all inputs to value assumptions are skewed."
Ray J  :  "even with a billion dollar credit line at .1 and 25x leverage?"
Adam Quinones  :  "when 10s hit 2.00% it distorts value of MBS...makes everything imaginary in my world."
Andrew Horowitz  :  "peopel buying tsy right now are not looking at yield they are looking at price points"
Adam Quinones  :  "2.00% is unappealing to me as an investor."
Adam Quinones  :  "10yr duration debt is loooooooong in the tooth right now."
Ray J  :  "imaginary how?"
Ray J  :  "bull flattener, moving out the yield curve, operation twist engaged."
Adam Quinones  :  "ha. it's like an imaginary indication."
Bromi Krock  :  "wow 2.0169!!!!!!!!!"
Adam Quinones  :  "we base volume reports off of desk color and electronic trading platform #'s"
Adam Quinones  :  "yeh. gains consolidating into rally midpoint."
Ray J  :  "How about a volume bar on the MBS charts>?"
Matt Hodges  :  "i agree with brent - a good jobs report and this day would mean something"
Brent Borcherding  :  "Today is a meaningless day, Andy."
Ray J  :  "any volume on the 3.5?"
Adam Dahill  :  "I've spent close to 4k on final inspections!!!"
Ira Selwin  :  "We are ordering recerts up the wazoo"
Adam Quinones  :  "Good Night Irene? No So Fast. It's Recert Time!: http://www.mortgagenewsdaily.com/channels/pipelinepress/09022011-irene-appraisal-recerts.aspx"
Andrew Russell  :  "ok, what I thought, thanks"
Matt Hodges  :  "that's all i see"