MBS RECAP: 12/14/2011

The Federal Housing Finance Agency (FHFA) today said it will extend implementation dates for a key component of the Uniform Mortgage Data Program (UMDP) announced in May 2010, known as the Uniform Loan Delivery Dataset (ULDD). Industry participants have demonstrated continued support for the UMDP and the updated timeline will allow for a successful transition to the new loan delivery format.

Specifically, Fannie Mae and Freddie Mac (the Enterprises) will delay the voluntary implementation date to April 23, 2012 and will require loan delivery in the new format on July 23, 2012 instead of March 2012. The new timeline for the ULDD does not affect Uniform Collateral Data Portal effective dates.

10yr yields just ticked to a fresh low on the day just under 1.91%. At the same time, Fannie 3.5's nudged their ceiling at 102-20. A few lenders have repriced for the better today, and it remains a possibility that more could follow, but we have to keep in mind that with rates effectively at all time lows, lenders' incentive to improve rebate further is about as low as it can be for a 10 tick rally. Also, keep an eye out for pipeline control reprices at lenders who have a history of such things or who otherwise seem to be getting overloaded with new locks over the past two days.

A feeding frenzy is underway for long term US debt as the Euro trades at its lowest levels since January. Whereas gold might normally catch a bit of safe-haven demand, the current strength of the Dollar relative to the Euro has gold plummeting to it's lowest levels since late September. Stocks are in the toilet as well with the S&P down to 1211. In the space of 1 hour, four decent-sized block trades hit 5 and 10yr futures. The Fed also sold a big chunk of 1-2 year paper today, and markets know full well that it ends up in the long end of the curve.

All of the above have been like helping hands, pushing the snowball further down the hill, and adding to its already hefty mass. If there's a clear cause and effect relationship between the 11am-ish acceleration of the bond market rally, it's not readily apparent. Perhaps a set-up for today's 30yr bond auction is also in play. What IS apparent is that MBS have been doing a fairly decent job of keeping pace with the rally. Fannie 3.5's are up 6 ticks on the day at 102-17, and we're already at a point where a few of the "early" lenders might be considering small reprices.