MBS RECAP: 2/13/2012

By: Matthew Graham
MBS Live: MBS RECAP
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FNMA 3.5
103-17 : +0-03
FNMA 4.0
105-10 : +0-02
FNMA 4.5
106-21 : +0-01
FNMA 5.0
108-01 : +0-02
GNMA 3.5
105-04 : +0-05
GNMA 4.0
107-25 : +0-04
GNMA 4.5
109-08 : +0-02
GNMA 5.0
111-02 : +0-02
FHLMC 3.5
103-08 : +0-04
FHLMC 4.0
104-30 : +0-02
FHLMC 4.5
106-06 : +0-03
FHLMC 5.0
107-23 : +0-01
Pricing as of 4:03 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBS Live Dashboard.
2:54PM  :  Fed Releases Orders Related to Banks in Mortgage Settlement
The Federal Reserve Board on Monday released the orders related to the previously announced monetary sanctions against five banking organizations for unsafe and unsound processes and practices in residential mortgage loan servicing and processing. The Board reached an agreement in principle with these organizations for monetary sanctions totaling $766.5 million on February 9, 2012.
1:52PM  :  ALERT: Treasuries Turn Negative in Light Volume, MBS Follow But Outperforming
If it weren't for the rather abrupt directional jolts in Treasuries since 11am, we'd say that 10yr yields are trading "aimlessly" higher. Indeed, volume is low, and one has to seek out market moving motivation (as opposed to being uncontrollably confronted with it), but a 1.96 to 2.0 move in the space of a few hours is perhaps too aggressive to be considered aimless. Aimlessly aggressive, perhaps?

With the relatively important Retail Sales report out tomorrow, as well as several other pieces of economic data, combined with the striking absence of any Greek headlines is creating the impression that the 2nd half of today's domestic session may stand out as the last period of relative calm between now and Wednesday's sure-to-be-riveting Eurogroup meeting. Some accounts could be setting up defensively for those upcoming events, but yields got some support after running to 2.0 and are currently at 1.9931.

Treasury volatility notwithstanding, MBS continue to be a bit more even-keeled, still in positive territory on the day, up one tick at 103-15. We got one report of a positive reprice earlier, but it was justified given that the lender in question priced early, and was lagging well behind its normal cohort in terms of pricing competitiveness. Reprices are less likely after the current bit of weakness. And if things got any weaker, there could even be a small chance of negative reprices, though neither are especially likely given the current range.
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBS Live Dashboard.
Jeff Anderson  :  "REPRICE: 3:23 PM - Chase Better"
Eric Franson  :  "Not much. Around 15 bps."
Matt Hodges  :  "how much improvement?"
Eric Franson  :  "REPRICE: 12:56 PM - Wells Fargo Better"
Ira Selwin  :  "more money, less loans to get that money from"
Kent Mikkola #353976  :  "those fee increases will drive more credit worthy borrowers to conventional loans with MI and they will be left with riskier loans"
Matt Hodges  :  "wrong approach to increase revenue"
Gaius Rossini  :  ""In October 2010, FHA increased its annual premium by 0.25 percentage points and in April 2011 implemented another increase of this same size. The Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3630) mandated a further increase in FHA's annual insurance premiums. In accordance with this legislation, FHA will soon implement a 0.1 percentage point increase to annual premiums for single family forward mortgages. Loans over $625,500 will pay an additional 0.25 percentage point annual prem"
Gaius Rossini  :  ""The Budget includes the recently enacted increases in FHA premium levels. These will boost FHA’s capital reserves — to better protect taxpayers against the risk of credit losses by the program — and increase Federal revenues""
Matthew Graham  :  "and I'm sure the White House would greatly prefer NOT to keep rates low, as a necessary precursor to such a thing even happening would be a much stronger economy in an environment with greatly diminished European risks. In other words, higher rates would mean serious sunshine and lollipops had cropped up somewhere"
Scott Valins  :  "i guess WH has to be optimistic of growth and recovery which would naturally lead TSYs higher"
Matthew Graham  :  "traders aren't going to trade White House estimates"
Scott Valins  :  "wow 2.8 in 2012 - what's behind that estimate? Don't they want to keep rates low?"