MBS RECAP: Still Sideways, Waiting For Guidance
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
The great sideways grind continued for bond markets today with 3pm marks for 10yr Treasuries not even 2 bps off yesterday's. Fannie 3.5 MBS had an "inside day," in that they spent the entire day 100% contained by yesterday's range. MBS performed weaker in the morning and better in the afternoon vs Treasuries, ultimately flattening out about an eighth of a point higher than yesterday afternoon's highs. Tonight's Spanish 10yr Auction poses a short term risk and also serves to let us know how much of the recent flatness is due to European concerns as opposed to next week's FOMC Announcement. We know that the latter is obviously keeping things contained to a certain extent, but it will be interesting to see if either end of the recent range will be stretched slightly wider if we see a surprising Spanish auction.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
|
|
|
||||||||||||
| Pricing as of 4:04 PM EST | ||||||||||||||
Afternoon 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 afternoon.
1:43PM :
ALERT ISSUED:
Wider Spreads, Waning Supply, Attract MBS Buyers
Earlier in the day, MBS had somewhat of an issue with limited bid-side demand combined with more than enough supply from MBS Originators (meaning either you're locking or they're hedging or some of both!). The result is wider spreads between the calculated yields of MBS coupons and various benchmarks such as the 10yr Treasury yield.
The wider the spreads between MBS and benchmarks, the greater the relative value. Partly because of that value and partly due to the drop-off in new MBS originations into the afternoon (sellers got their fill?), we're seeing spreads hold their ground and buyers on more equal footing or even outnumbering sellers.
It's not an out-and-out reversal of fortune for MBS, but it is a nicely timed show of support as spreads are no longer widening and 10yr yields are trading near their lows. The result is MBS at their highs of the day: 103-15 in Fannie 3.5s. Being 5 ticks up on the day, positive reprices are possible among the "early crowd" and one has already been reported.
Underlying all this is THE RANGE. Whether we're looking at Treasuries or MBS, the trading range of the past two weeks continues to offer firm support and resistance on either side. There's really not much to be said until we break higher or lower. For Fannie 3.5's, that's around 103-20. Everything else amounts to minor adjustments in the range, the most recent being in our favor.
The wider the spreads between MBS and benchmarks, the greater the relative value. Partly because of that value and partly due to the drop-off in new MBS originations into the afternoon (sellers got their fill?), we're seeing spreads hold their ground and buyers on more equal footing or even outnumbering sellers.
It's not an out-and-out reversal of fortune for MBS, but it is a nicely timed show of support as spreads are no longer widening and 10yr yields are trading near their lows. The result is MBS at their highs of the day: 103-15 in Fannie 3.5s. Being 5 ticks up on the day, positive reprices are possible among the "early crowd" and one has already been reported.
Underlying all this is THE RANGE. Whether we're looking at Treasuries or MBS, the trading range of the past two weeks continues to offer firm support and resistance on either side. There's really not much to be said until we break higher or lower. For Fannie 3.5's, that's around 103-20. Everything else amounts to minor adjustments in the range, the most recent being in our favor.
11:24AM :
Heavy Supply, Limited Bid-Side Support, Technical Levels Hold
Even from afar, today showed promise as having the potential to be "mostly dead" in terms of market moving data, and indeed, market movements themselves. Thus far, it has not disappointed with as close to ZERO motivation to take things in one direction or another. The first high in MBS prices was just under yesterday's high; the first low just above yesterday's low... Result: narrow range.
That said, with the 103-10 technical level underfoot and some recent underperformance, MBS have entered a zone where they could be looking a bit more attractive to some investors. Combine that with the fact that the bid-side of the market was fairly subdued this morning versus a relatively heavy supply of new origination (aka: "offer side" or "selling pressure") for such a tight day, and we have the ingredients for a supportive afternoon, provided that underlying benchmarks such as 10yr yields also do a decent job of holding their range. So far they have... So far so good.
That said, with the 103-10 technical level underfoot and some recent underperformance, MBS have entered a zone where they could be looking a bit more attractive to some investors. Combine that with the fact that the bid-side of the market was fairly subdued this morning versus a relatively heavy supply of new origination (aka: "offer side" or "selling pressure") for such a tight day, and we have the ingredients for a supportive afternoon, provided that underlying benchmarks such as 10yr yields also do a decent job of holding their range. So far they have... So far so good.
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.
Andy Pada : "three ways to cancel MI: 1) automatic cancellation when the upb hits 78% at the scheduled amortization date or at the mid-point of the mortgage term; 2) when the borrower asks the servicer to remove MI based on the original value; 3) when the borrower asks the servicer to remove MI on the current value."
Andy Pada : "Sorry to be MIA; if the MI automatic cancellation at 78% is involving automatic cancellation as opposed to the two other options involving borrower initiated cancellation based on original value or new appraised value."
Mike Pennington : "REPRICE: 2:38 PM - Flagstar Better"
Oliver S. Orlicki : "REPRICE: 2:36 PM - Provident Funding Better"
BVG : "REPRICE: 1:37 PM - Interbank Better"
Ken Crute : "YEP andy, O/A seems to be worse "
Andy Pada : "Are invesors/aggregators pricing differently between DU Refi Plus and Relief Refi Open Access?"
Read what our user's have to say about MBS Live on LinkedIn.
» Start a two week free trial of MBS Live.