MBS RECAP: Trying To Find A "Happy Place" After Three Days Of Losses
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
MBS spent the day doing battle with weakness from the overnight session, and were certainly successful within the confines of the domestic session, but the fruits of those labors are mostly noticeable in MBS Prices as opposed to lenders' rate sheets. The overnight weakness started us off in a bad way, testing 104-04 support levels--a pretty scary place to be after beginning the week hoping to hold 104-16 pivot points, breaking lower and hoping to hold 104-10 by the end of the day. So perhaps we can better appreciate that lenders might have been sensing a "scary pattern of losses" seemingly forming, and with the uncertainty created by tomorrow's EU Summit along with the more germane 5yr Treasury Auction, how they might be somewhat 'less aggressive' (to put it nicely) with respect to recent rate sheet offerings.
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.
2:18PM :
ALERT ISSUED:
Decent Uptrend In Progress For MBS
What had earlier been a sort of ping pong match between horizontal support and resistance levels (104-04 and 104-10) in Fannie 3.5 MBS has since given way to a moderate uptrend. While there are indeed higher lows from this morning, the 104-10 resistance level remains intact for now, but with Treasuries generally calming down and looking like they'll shy away from a break above 1.80 in 10yr yields, we could see some of the early crowd lenders throw out a positive reprice this afternoon (in fact, one just did as we were typing).
Shouldn't be a widespread phenomenon at current levels, but a few additional lenders might get involved. More importantly, there's an absence of immediate negative reprice risk for those of you considering locking between now and cut-off.
Shouldn't be a widespread phenomenon at current levels, but a few additional lenders might get involved. More importantly, there's an absence of immediate negative reprice risk for those of you considering locking between now and cut-off.
11:58AM :
Greeks See Euro Zone Exit Risks as 'Empty Threats'
In a land of ancient myths, modern Greeks have created some of their own about their near-bankrupt country's future as an integral part of a Europe that will never kick them out.
Solemn warnings from abroad that Athens cannot stay in the euro while rejecting the terms of its international bailout are widely disbelieved.
However bad their prospects, many Greeks seem to think that since money to bail them out was found in the past, it will be found again, whatever politicians say.
Nor do they believe that Europe will simply cast them loose, despite growing signs that Greece is heading for the exit from the single currency and towards the economic and social catastrophe that would follow.
"There's a lot of money in this country, they just need to tax the rich and it would solve so many problems," said seamstress Argiro Maniati, 55.
Working furiously at her sewing machine surrounded by tall piles of mended clothes her customers can't afford to collect, Maniati fully embraces the myth that Greece's membership of the euro can never die.
Like many Greeks who punished mainstream parties in a fruitless May 6 election that has brought Greece to the edge of a political abyss, she thinks politicians have exaggerated the threat of euro expulsion to scare up votes for failed policies.
Solemn warnings from abroad that Athens cannot stay in the euro while rejecting the terms of its international bailout are widely disbelieved.
However bad their prospects, many Greeks seem to think that since money to bail them out was found in the past, it will be found again, whatever politicians say.
Nor do they believe that Europe will simply cast them loose, despite growing signs that Greece is heading for the exit from the single currency and towards the economic and social catastrophe that would follow.
"There's a lot of money in this country, they just need to tax the rich and it would solve so many problems," said seamstress Argiro Maniati, 55.
Working furiously at her sewing machine surrounded by tall piles of mended clothes her customers can't afford to collect, Maniati fully embraces the myth that Greece's membership of the euro can never die.
Like many Greeks who punished mainstream parties in a fruitless May 6 election that has brought Greece to the edge of a political abyss, she thinks politicians have exaggerated the threat of euro expulsion to scare up votes for failed policies.
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.
Andrew Horowitz : "former PM says risk of Greec exiting the Euro is real....shocker there :-)"
Andrew Horowitz : "OMG news out of Greece and Euro plunges"
Matthew Graham : "little lovin' from the lever for bond markets"
Matthew Graham : "better part of a 10pt slide in the last 40 minutes for S&P's"
Matthew Graham : "stocks giving it all back in the last hour"
john murphy : "ABM: Cite B-3 6-01 of the Guide...your answer is there"
john murphy : "it's an investor overlay, certainly not Fannie"
Aaron Buyside Meyer : "exactly my point, oh well"
Jason York : "I thought that it was jsut excluded if there were less than 10 payments remaining, I don't remember you having to have the money to actually pay it off"
Aaron Buyside Meyer : "Interesting I don't ever remember showing the assets were there with less than 10 payments before. They have it in savings. I have never seen this condition that's all"
Bromi Krock : "if there are less than 10 payments left and you have enough to pull it in full then they will omit it from your ratios. Put it back in the ratios and you don't need to show you have the money."
Mike Drews : "must be omitting from ratios"
Matthew Graham : "did they omit it from ratios?"
Aaron Buyside Meyer : "Why is Franklin American making me show my client has enough in assets to cover an auto loan that has only 7 payments left?"
Rob Clark : "REPRICE: 2:15 PM - Provident Funding Better"
Brent Borcherding : "All of that description, and Hodges' concise wrap up, appear to be the EXACT reasons thsi will absolutely continue to weigh on markets."
Matt Hodges : "i.e. lack of stable governments"
Matthew Graham : "things that we can comprehend and discuss in mere moments stateside can take hours and days when they concern the economic and political structures of some EU periphery."
Matthew Graham : "this is a big problem with the EU really. I get the impression that a lot of really really smart dudes are just now in the process of learning enough about how things work over there to be able to comment intelligently on it."
Brent Borcherding : "Euro-drama ABSOLUTELY will continue to weigh on rates! I'll say it."
Matthew Graham : "who knows... I think the most important take-away from markets right now is that there's no way to know exactly what's going to happen. The Euro-drama bet has been a relatively safe and profitable one. But I don't know enough about how things work over there OR how they COULD work over there to say "euro-drama absolutely will continue to weigh on rates." "
Brent Borcherding : "SO, you're saying this ISN'T the end of low rates?"
Matthew Graham : "there's not real "cause and effect" for today's weakness, but a lot of events can be cited and their importances guessed at. In the grand scheme of things though, we're still in a pattern of 'leveling off' from an aggressive bull run. could be that that's as bad as it gets, but if a few of the pivot points noted are broken, could maybe possibly be some sort of minor shift, but I'd keep going back to the notion that impending events in June are more likely than not to keep the range more contai"
Andrew Horowitz : "so far it was only 104-03"
Matthew Graham : "check out the "live update" from 10:22am. speaks more to that question. And also, take a look at the charts here: http://www.mortgagenewsdaily.com/mortgage_rates/blog/260183.aspx for longer term context. "
Thomas Nelson : "Why were we down so far this morning?"
Adam Quinones : "...buying down in coupon is like going upstream in a river. Selling away from that position is like going downstream. MUCH FASTER TRIP!"
Adam Quinones : "como se dice "Extension Risk" in Plain and Simple, MG?"
Matthew Graham : ""Matthew Graham (5/21/12 3:33PM): support levels are 104-10, 104-04, 104-00""
Matthew Graham : "" Christopher Stevens (5/21/12 3:27PM): MG- at what level would we like to see a bounce on the 3.5 before we worry about further losses""
Matthew Graham : "hey TN. Here are a few chats from y'day afternoon. The 'gist' is that we bounced off one clearcut support level and weren't quite ready to make it back through the next:"
Thomas Nelson : "Just logging on....Is this new "breakout" a bad thing on the 3.5?"
Adam Dahill : "GUS- I've gotten Wells to do non arms length deals"
Gus Floropoulos : "Sponsor of a condo that sold 90% is looking to buy 1 unit for himself as a primary. Hes been renting it for the last year. How do u recomend structuring it, and which investor would be the easiest to work with on a non-arms legth deal like this?"
Matthew Graham : "speaking of European politics, Here's an article I just saw that speaks to the question that seems to come up fairly regularly: http://blogs.wsj.com/economics/2012/05/22/economists-react-what-happens-if-greece-leaves-euro-zone/"
Derek Nadvornick : "Rob, I've had miuch higher ratios approved LP, but with 780+ FICO. Below 740 gets caution."
Rob Ellis : "HARSH"
Rob Ellis : "Nope 25% for Freddie Refi Plus is what I'm seeing making the difference between Caution and Streamlined Accept"
Matt Hodges : "45% dti?"
Rob Ellis : "Adrian - I've ran several LPs for Freddie Refi's, here's what I've learned, LP is looking for a back end ratio of 25% and reserves (be sure to review your LP findings carefully as many times you'll have to go in and input reserves while in LP. I learned the DTI issue by comparing results with Accepts vs Caution. One borrower had a small car loan paid off, I updated credit re ran with 25% DTI (versus 27%) and she was approved - Caution with 27%, $140k in reserves, and 109% LTV."
Adrian Webb : "Daniel, thank you for the response, is it suppose to get any better?? Any ideas?"
Dan Clifton : "ok, so just got a CTC on a loan. Title co asked me to draw docs for wed, and then proceeds to ask "is it a big deal if the purchase price changes"!!!!"
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