MBS MID-DAY: Holding Marginal Gains in Quiet Trade

By: Matthew Graham
MBS Live: MBS Morning Market Summary
The bulk of today's 'excitement,' if you can call it that, was really seen during the overnight hours thanks to some good old European micro-drama (nothing major apart from rising concerns over Spain and some weak economic data from UK and Germany).  Volume ramped up into the first 30 minutes of the New York session, but has been tapering off ever since.  Basically, it was a concerted push to the strongest recent levels followed by a concerted bounce before breaking the range.  Now we're right back to where we were before the overnight/morning pop: range-bound and waiting to see if NFP is going to suggest a test of either side of that range before the holiday weekend.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
102-23 : +0-04
FNMA 4.0
104-29 : +0-04
FNMA 4.5
106-13 : +0-02
FNMA 5.0
108-02 : +0-02
GNMA 3.5
104-11 : +0-03
GNMA 4.0
107-17 : +0-03
GNMA 4.5
108-30 : +0-03
GNMA 5.0
110-16 : +0-03
FHLMC 3.5
102-16 : +0-04
FHLMC 4.0
104-19 : +0-03
FHLMC 4.5
106-01 : +0-02
FHLMC 5.0
107-20 : +0-01
Pricing as of 11:09 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this morning.

10:03AM  :  Fredddie Mac: 30-Year FRM Ticks Down to 3.98 Percent
30-year fixed-rate mortgage (FRM) averaged 3.98 percent with an average 0.7 point for the week ending April 5, 2012, down from last week when it averaged 3.99 percent. Last year at this time, the 30-year FRM averaged 4.87 percent.

15-year FRM this week averaged 3.21 percent with an average 0.7 point, down from last week when it averaged 3.23 percent. A year ago at this time, the 15-year FRM averaged 4.10 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.86 percent this week, with an average 0.8 point, down from last week when it averaged 2.90 percent. A year ago, the 5-year ARM averaged 3.72 percent.

1-year Treasury-indexed ARM averaged 2.78 percent this week with an average 0.6 point, unchanged from last week when it averaged 2.78 percent. At this time last year, the 1-year ARM averaged 3.22 percent.
9:41AM  :  ALERT ISSUED: Bond Markets Start Strong, Weakening Into Domestic Session
The fact that yields are correcting higher as the domestic session picks up is the first clue and "us telling you" is the second clue that these gains are driven by the overnight session. Who else would you expect to come to the rescue when bond markets seem beset by dark times?

The team effort out of the EU overnight was led by Spain, where yesterday's weak debt auction kicked off a chain reaction of skepticism about the country being able to handle its debt. Germany and the UK piled on with weak Industrial Production reports and 'tradeflows' put the icing on the cake as traders were perceived to be squaring up positions ahead of the holiday weekend (many markets are closed tomorrow, though domestic bond markets are open until Noon Eastern).

Any talk of "position squaring" in this market carries the implication of "short covering" (when traders ultimately decide to buy a security that they'd bet would move lower in price). Although there was a solid line of defense after 10yr yields cracked 2.30% from other sources, short covering helped the bounce back yesterday and again overnight.

We don't say this to diminish the current rally, but rather to simply say "it is what it is..." The fact that yields ran almost precisely to the stronger end of their recent range and quickly stepped back is a very telling feature here... There's no CHANGE of strategy or "new trading ideas" as it were... simply an effort to square up positions or follow the ebbs and flows within the confines of a range, either because you're trying to be done with the holiday-shortened week or because you're waiting in the most nimble position ahead of tomorrow's NFP.

Bottom line, things are green, and that's nice, and we thank Europe for that, but don't read anything into it as far as big fundamental shifts... Truth be told, we'd rather come into NFP in more neutral territory and thus not have to defend a 'king of the hill' position.
8:38AM  :  ECON: Jobless Claims Slightly Higher Than Expected
*357k vs 355k consensus.
*Previous revised higher from 359k to 363k
*4 week avg down to 361.75k from 366k
*Continued claims down to 3.338 mln from 3.35 mln
*claims lowest since 4/2008

In the week ending March 31, the advance figure for seasonally adjusted initial claims was 357,000, a decrease of 6,000 from the previous week's revised figure of 363,000. The 4-week moving average was 361,750, a decrease of 4,250 from the previous week's revised average of 366,000.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending March 24, unchanged from the prior week's unrevised rate of 2.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending March 24 was 3,338,000, a decrease of 16,000 from the preceding week's revised level of 3,354,000. The 4-week moving average was 3,367,250, a decrease of 24,500 from the preceding week's revised average of 3,391,750.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Brayden Alexander  :  "empty pools need to be covered... uncovered pools need to be filled."
Daniel Kramer  :  "wow, just got a condtion added to a refi loan becuase the appriasal showed the subject property has an inground pool, and the picture in the report showed it empty. U/w says that is a health risk, and pool needs to be filled and recertified before we can close. borrower sayas he is not filling the pool for another 6-7 weeks, when the weaher is warmer. anyone ever hear of this?> i havent in ten years"
Ira Selwin  :  "Volatility is always bad, either way. "
Matthew Graham  :  "no, not even wishful. It's just not going to happen. Ira will be the first to tell you that recent volatility increases hedging costs a lot. It's the reason you didn't see yesterday's green translate to much by way of rate sheet gains"
Oliver S. Orlicki  :  "wishful thinking MG"
Matthew Graham  :  "don't expect lenders to be beating down any doors trying to throw cash at you after the past few days of volatility"
Oliver S. Orlicki  :  "lets see how pricing is this morning...lenders owe us some juice"
Oliver S. Orlicki  :  "I agree dirk. Blesssing making back what we lost on Tuesday...let's not push it."
Dirk Postupack  :  "just need to be prepared for tomorrows NFP report......I am locking all loans and not even messing with it.....if i guess wrong i will be fine with it...."
Jay Rafuse  :  "amen!"
Dirk Postupack  :  "only another 4 / 32nds and we are right back to where we were befor the fed minutes wer read.......I'll take that...."
Matthew Graham  :  "http://www.mortgagenewsdaily.com/mortgage_rates/blog/253947.aspx"
Oliver S. Orlicki  :  "I am happy we are green. Where's our pivots for the day?"
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS LOWEST SINCE MID-APRIL 2008; CONTINUED CLAIMS LOWEST SINCE AUG 2008 "
Lynn ONeal  :  "Sure it will again vic"
Matthew Graham  :  "RTRS - US CONTINUED CLAIMS FELL TO 3.338 MLN (CON. 3.350 MLN) MARCH 24 WEEK FROM 3.354 MLN PRIOR WEEK (PREV 3.340 MLN)"
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS 4-WK AVG FELL TO 361,750 MARCH 31 WEEK FROM 366,000 PRIOR WEEK (PREVIOUS 365,000) "
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS FELL TO 357,000 MARCH 31 WEEK (CONSENSUS 355,000) FROM 363,000 PRIOR WEEK (PREVIOUS 359,000) "
Victor Burek  :  "go figure, prior week revised higher"
Matthew Graham  :  "357"
Oliver S. Orlicki  :  "survey says..."
Victor Burek  :  "not unemployment...its jobless claims"
Victor Burek  :  "355"
Oliver S. Orlicki  :  "what's the forecast?"
Dirk Postupack  :  "unemployment reports in 5 minutes....."
Oliver S. Orlicki  :  "today is going to be a good day to lock them up"
Oliver S. Orlicki  :  "Loving the green"

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