MBS RECAP: Snowball Buying As Fedspectations Team Up With Euro-Drama
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
Two of our favorite made-up terms joined forces today to carry MBS to yet another all-time high and 10yr yields to the high 1.6's! The day looked as if it would be a deceleration in terms of volume and volatility this morning, but we turned out to be quite wrong about that, although rates moved in the right direction for MBS watchers. The culprits were overnight headlines in Europe that noted a similar "run on the bank" going on in Spain as the one just seen in Greece. Even if the news and events themselves weren't responsible for subsequent all-time lows in German Bund yields, they certainly reminded investors that there are bigger fish to fry regardless of how Greece plays out. Then there was the Philly Fed data, which in and of itself, isn't cause for 1.70% 10yr TSY yields, but when we have the FOMC standing by to stimulate "as needed," the progressively weaker data perhaps has more than a few investors thinking that the June FOMC announcement could be a little more bond-market-bullish if recent trends simply hold steady, let alone accelerate.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
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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.
2:05PM :
ALERT ISSUED:
MBS Continue Taking Out Record Levels As Duration Grab Is On!
It doesn't seem like we get to talk about snowball buying nearly as much as snowball selling, but here ya go! Snowball buying in bond markets and unlike most reasonably quick-paced bond market rallies, MBS are doing a decent enough job keeping pace with Treasuries in this one. As a result, Fannie 3.5's have taken out previous record highs on several occasions today.
Fannie 3.5's are currently 7 ticks higher on the day at 104-20. 3.0's are seeing a small increase in activity, so we'll mention them as well: up 12 ticks at 102-04 (please note, they accounted for only about 1/35th the TBA volume of 3.5's y'day). Meanwhile, 10yr yields are down almost 5bps at 1.7107. Previous record lows for modern economic history are at 1.674.
Traditionally, such price improvements are grounds for positive reprices in mortgage land, and although we might see a few, we'd continue to expect them to be scarce and small as lenders have little incentive to rapidly improve rate sheets given the current volume of refi activity (among other things).
Fannie 3.5's are currently 7 ticks higher on the day at 104-20. 3.0's are seeing a small increase in activity, so we'll mention them as well: up 12 ticks at 102-04 (please note, they accounted for only about 1/35th the TBA volume of 3.5's y'day). Meanwhile, 10yr yields are down almost 5bps at 1.7107. Previous record lows for modern economic history are at 1.674.
Traditionally, such price improvements are grounds for positive reprices in mortgage land, and although we might see a few, we'd continue to expect them to be scarce and small as lenders have little incentive to rapidly improve rate sheets given the current volume of refi activity (among other things).
11:29AM :
Philly Fed Market-Movement or Just a Symptom of QE3 Expectations?
The main market-mover of the morning was the release of the Philadelphia Fed Survey, the chief component of which fell from 8.5 last month to -5.8 today. This happens occasionally with regional manufacturing reports and particularly, we're reminded of the August Philly Fed Index that fell to -22 from a +6.2 in July. Although that instance constituted a bigger discrepancy, today's is arguably as much of a surprise considering the recent relative stability of the data (or even "uptrend" with the exception of last month's minor pull-back). Amazingly, it kicked off the biggest hour of volume of the week by a small margin over y'day's hour following the Greece/ECB news. MBS hit another all time high albeit by a small margin and 10yr yields now trade under 1.75. It's impressive, and perhaps comforting to see domestic economic data retain some of its ability to move markets. Then again, this Philly Fed, or rather, the market movement following it, likely has more to do with QE expectations than the data itself.
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.
Paul Kramer : "REPRICE: 3:54 PM - Stearns Lending Better"
Ross Miller : "REPRICE: 3:53 PM - NYCB Better"
Chip Harris : "REPRICE: 3:49 PM - FPF Wholesale Better"
Victor Burek : "REPRICE: 3:45 PM - Plaza Better"
Eric Franson : "REPRICE: 3:02 PM - Wells Fargo Better"
Michael Tadros : "REPRICE: 2:59 PM - Provident Funding Better"
Matthew Graham : "RTRS - DEALERS EXPECTED 0.75 PCT FEDERAL FUNDS RATE AT END OF 2014 -MEDIAN IN NY FED APRIL SURVEY "
Matthew Graham : "RTRS - U.S. PRIMARY DEALERS EXPECTED FIRST INTEREST RATE HIKE IN Q3 2014 -MEDIAN IN NY FED'S APRIL SURVEY "
Matthew Graham : "RTRS - DEALERS SAW MEDIAN OF 45 PCT CHANCE FED WOULD BUY SECURITIES TO EASE POLICY WITHIN A YEAR -NY FED SURVEY "
Matthew Graham : "RTRS - FITCH CUTS GREECE'S SHORT-TERM FOREIGN CURRENCY IDR TO 'C' FROM 'B' "
Matthew Graham : "RTRS - FITCH TAKES NEGATIVE RATING ACTIONS ON GREECE "
Justin Heiden : "should be okay...it is appraiser identified. had the issue on a property in southern IL. deal closed okay"
Victor Burek : "there is no surface drilling anywhere near the property"
Justin Heiden : "VB per HUD: no dwelling may be located closer than 300 feet from an active or planned drilling site or 75 feet from an operating well; this applies to the site boundary, not to the actual well location"
Victor Burek : "does fha have problem with a property on 16acres that has a oil lease on the property..there is no surface drilling"
Matthew Graham : "anyone have a thought on why this IS NOT incongruous with yesterday's statements from Draghi that the ECB won't compromise it's mandate to assist Greece? Seems like a blatantly 'wrong' thing for Bullard to say."
Matthew Graham : "RTRS - BULLARD - DON'T EXPECT FINANCIAL MELTDOWN IN EUROPE BECAUSE ECB HAS PLEDGED TO PROVIDE LIQUIDITY "
Rob Clark : "REPRICE: 12:40 PM - Provident Funding Better"
Jason Sheaffer : "rates are insane. I quoted someone 3.25% 30 years fixed with 1 point today."
Alan Craft : "I'm with you JY. Feelin locky"
Jason York : "I'm leaning towards locking some I would normally continue to float with"
Matt Hodges : "better to have locked when you should have floated, than the reverse"
Curt Sandfort : "i know the float boat is out, but I am locking everything"
Daniel Kramer : "best ex with must lenders i see is 3.50 to 3.625 dependign on what you can and want to make"
Curt Sandfort : "agreed DK, already have one of my 4.375% deals from a year ago in the pipeline"
Daniel Kramer : "the rest already refinacned or cant, or are HARP"
Daniel Kramer : "the only new biz i am goijng to see from this are the clients i refinanced just 6-9 months ago who just got 4.25% to 4.50%, they wil now get 3.625 to 3.75%, if these rates last"
Tom Schwab : "REPRICE: 11:55 AM - Franklin American Better"
Patrick Waldron : "3.0 Fannie just hit 102 for the second time today."
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