MBS MID-DAY: Scheduled Fed Buying The Focal Point On Otherwise Data-Less Morning

By: Matthew Graham
MBS Live: MBS Morning Market Summary
With the passing of the 10:15-11:00am scheduled "Operation Twist" buying from the Fed, we now know why bond markets bothered to get out of bed today.  That's actually an overstatement as there was in fact a decent amount of volume in the overnight session and into the domestic open, but the Fed buying has elicited the more notable surge in volume and price movement.  Thus far, that movement has been positive for TSYs and MBS with Fannie 3.5's ticking back into the green following the Twist buying details.  Confounding that assessment somewhat is the fact that stock markets look like they're considering a bounce lower around the same time as TSY yields.  Given the limited data calendar, we'd been looking for a well-connected stock lever, and indeed we got it so far today.  Whether or not it continues to be connected is less clear as bond yields and stock prices look more willing to diverge now.  The bottom line here is a subtle, supportive stance for MBS.  We're on cruise control while keeping an eye out for unexpected hazards.
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
104-17 : +0-03
FNMA 4.0
106-06 : +0-03
FNMA 4.5
107-05 : +0-02
FNMA 5.0
108-14 : +0-01
GNMA 3.5
106-08 : +0-03
GNMA 4.0
108-30 : +0-04
GNMA 4.5
109-22 : +0-04
GNMA 5.0
110-22 : +0-03
FHLMC 3.5
104-11 : +0-01
FHLMC 4.0
105-27 : +0-01
FHLMC 4.5
106-23 : +0-02
FHLMC 5.0
107-22 : -0-03
Pricing as of 11:05 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.

10:29AM  :  ALERT ISSUED: Bond Markets Sideways Near Friday's Weakest Levels
The overnight session saw more than its usual amount of volume and volatility albeit on limited trading motivation. 10yr yields made it as high as the low 1.77's before falling back to 1.72's just after the domestic open. Fannie 3.5 MBSopened roughly in line with Friday's closing levels and currently trade -0-01 on the day at 104-14. 10yr TSYs are currently at 1.7397.

With no major headlines overnight or this morning, bond markets have generally been following the 'risk-on/risk-off' trade, with a reasonable degree of correlation to stocks, though TSYs have recently held their ground on several occasions vs spikes in stock prices (in other words, while there is some correlation, bond markets don't seem willing to chase rising stocks indefinitely). An increasing amount of focus seems to be on the upcoming EU Summit on Wednesday, from which markets hope to see meaningful crisis management strategies emerge.

Apart from Wednesday, we're also being asked to hold our breath for Greek elections in June where polls are showing a "dead-heat" between pro-bailout and anti-bailout leaders if the election were to be held now, according to Reuters. That said, anti-bailout leader Tsipras was out yesterday saying that he would pursue talks with EU leaders on terms to keep Greece in the Euro-zone.

This is a marked change in tone, and frankly, we were surprised 10yr yields continue to hold in the 1.73's considering the picture being painted of a slightly less likely EU exit. But no matter the suggestion of the anecdotal evidence, broader uncertainty remains and likely can't be fully resolved until after the elections (see the 9:51am update on "majority of Eurogroup Would Vote For Greek Exit" for a good counterpoint here).

In addition to the Greek vote next month, there are plenty of medium to large-sized interim considerations including, but not limited to this week's EU Summit, next week's heavy Thursday/Friday of data including NFP, the ongoing development of Spain's banking problems.

With essentially no data today, we're just sort of floating where the currents of "risk" may take us. We continue to see that river as relatively well-contained with market participants not being keen to do anything "too different" from other market participants in these vastly uncertain times. EU collapse and Fed QE3... Only more clarity on the likelihood of these two things will significantly alter the range.
9:51AM  :  Majority of Eurogroup Would Vote For Greek Exit
Officially, euro zone governments say they're not talking about a Greek exit from the euro zone. But it's a different story behind closed doors. Finance ministers meeting in Brussels last Monday threatened to evict Greece, SPIEGEL has learned. Meanwhile, Germany denied reports that Chancellor Angela Merkel called for Greece to hold a referendum on the euro.

Despite official claims to the contrary, the governments of the euro zone are threatening to kick Greece out of the currency union. At a meeting of euro-zone finance ministers last Monday in Brussels, it was made clear to Greek Finance Minister Filippos Sachinidis just how serious the situation had become.

"If we now held a secret vote about Greece staying in the euro zone," Euro Group Chairman Jean-Claude Juncker warned his Greek colleague, "there would be an overwhelming majority against it." Other participants in the meeting also had harsh words for Sachinidis, with particularly strong criticism towards Athens coming from Portugal and Ireland, countries that have also accepted bailouts in the crisis.
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.

Dan Clifton  :  "Mortgage Man 360 mortgage should take it"
MortgageMan007  :  "I'll reask a ? I asked late Friday now that hopefully there are more of us on here....Fannie MAe DU Refi PLus. Current servicer BofA. Has monthly Lender paid MI through Radian. Can I do this anywhere to transfer the MI?"
MortgageMan007  :  "I couldn't get it yesterday Dan"
Ray Pearsall  :  "I did last Friday and have not gotten back to it yet today"
Dan Clifton  :  "anyone else having trouble with the Freddie HARP look up website? "
Matthew Graham  :  ""if/then" "let us make it clear for you""
Matthew Graham  :  "nothing much new or surprising here, but just more brushstrokes in painting the road-map to more easing"
Matthew Graham  :  "RTRS- FED'S LOCKHART: LOW US PAYROLLS NUMBER JUSTIFIES SOME CONCERN ABOUT A SLOWDOWN IN JOB CREATION "
Matthew Graham  :  "RTRS- FED'S LOCKHART: WOULD CONSIDER QE3 IF THERE IS SEVERE DETERIORATION IN UNEMPLOYMENT AND DEFLATIONARY TENDENCIES "
Matthew Graham  :  "RTRS- FED'S LOCKHART: WOULD LIKE TO SEE ECONOMY IMPROVE, BUT CANNOT RULE OUT FURTHER STIMULUS "
Matthew Graham  :  "RTRS - TOKYO-FED'S LOCKHART: PROBABLY WON'T BE NECESSARY TO EXTEND OPERATION TWIST "
Adam Quinones  :  "I can't speak to that relationship to well...all the color Ive read has focused on Greece."
Adam Quinones  :  "re: France/US. Agreeing on something?"
Adam Quinones  :  "Greece is not already out of the Euro."
Andrew Horowitz  :  "AQ the part that we have not heard before is France and US agreeing on something, been opposite sides of a coin for years now"
Andrew Horowitz  :  "Greece is already out, these last elections pretty much sealed that"
Peter Gladkin  :  "greece will exit... just question of when"
Adam Quinones  :  "aka mkt sees 50/50 chance of QEIII ...ha"
Peter Gladkin  :  "way i see it Fed will not allow us to go into official recession...they will allow up to 15% equity correction before announcing QE3 at which time bond yields rise again... my tak. "
Adam Quinones  :  "mkt sees 50/50 chance at Greek exit from the Euro. "
Adam Quinones  :  "...havent I heard that before?"
Andrew Horowitz  :  "seems intriguing to me MG, Hollande and Obama agreeing on something and taking the battle to Merkel. Read several articles siting her displeasure with the tone of the G-8 meetings"
Matthew Graham  :  "seems like an emerging theme of "balancing act" to me AH"
Andrew Horowitz  :  "ok, bond talk for a bit, so the battle lines were drwan this weekend at Camp David, Austerity vs stimulus...who wins? Seems like it is Merkel vs the world right now"
Matthew Graham  :  "RTRS - CHICAGO FED NATIONAL ACTIVITY INDEX +0.11 IN APRIL VS REVISED -0.44 IN MARCH "
Andrew Horowitz  :  "FB getting hit in premarket LOL trading down to 37.43 right now"

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