MBS RECAP: Despite Slight Weakness, Bounce Back Gets 2nd Day Of Confirmation
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
While the namesake and the focus of our analysis is indeed MBS, we've often noted that 10yr Treasuries are our preferred barometer for longer term shifts and patterns in the broader rates markets. This isn't to say anything about the connection between particular securities and mortgage rates, simply to set the stage for the following points that pertain to Treasuries first and foremost. From a technical standpoint, we would have been comfortable with a "bounce back" from the recent sell-off at any level under 1.75 (1.7447 to be specific). To get back into the 1.6's was icing on the cake as the 1.67-1.69 band of yields is the next pivot area after the 1.75 zone. So to be holding under 1.69 into the close, 2 days after the bounce-back catalyst, both of which garnering decent volume for August trading sessions is fairly "smooth sailing" vis-a-vis "the bounce."
But the bounce is over now. We saw this yesterday as buy/sell flows balanced out and bond markets met resistance after addiing onto Wednesday's gains in the morning. Today then, was simply about reinforcing what we thought we saw yesterday. The losses aren't severe and aren't a "bad thing" per se. We don't want the bounce-back to look reckless and with today's step back, it looked just about perfect. It helps suggest a sideways trading range next week in what should be fairly quiet trading as markets gear up for the super important two weeks from 9/4-9/14. "Sideways," however, doesn't mean the trading range can't be wide, simply that the volatility should feel some gravity near current levels, barring a major surprise in the economic data or headlines. In other words, bond markets are NO LONGER trending, and await a new trend, most likely to emerge by mid September.
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.
1:48PM :
ALERT ISSUED:
Low Volume Volatility Leading MBS Weaker. Additional Reprices
Lenders that haven't come out with negative reprices yet are likely much closer now and some early repricers may be considering a second round as MBS have shed another few ticks. From a strategic standpoint, there is no major game afoot with respect to fundamental, big-picture changes to the outlook. This is "frustratingly incidental" weakness, and not tied to any headline event or news. Volumes have tapered off and should stay low for the rest of the session. Fannie 3.0s are now down 5 ticks on the day at 103-01.
11:44AM :
ECB mulls setting target bands for bond yields: sources
(Reuters) - The European Central Bank is considering setting yield band targets under a new bond-buying program to allow it to keep its strategy shielded and avoid speculators trying to cash in, central bank sources told Reuters on Friday.
Setting a band is an option gaining in favour among central bankers, but the decision would not be made before the ECB's September 6 policy meeting, the sources said.
"That is one of the options that is currently being discussed in the working groups and will then be handled by the Governing Council," a euro zone central bank official told Reuters on the condition of anonymity.
"That is the most likely approach, and also the one that could be most successful."
It is not clear how wide that band would be or how the ECB would then decide when to intervene in the bond markets to bring down the borrowing costs.
A further point under discussion is whether such a band would be tied to bond yields - their absolute interest rate levels - or bond spreads, the difference between a country's debt compared to the benchmark German bonds.
Setting a band is an option gaining in favour among central bankers, but the decision would not be made before the ECB's September 6 policy meeting, the sources said.
"That is one of the options that is currently being discussed in the working groups and will then be handled by the Governing Council," a euro zone central bank official told Reuters on the condition of anonymity.
"That is the most likely approach, and also the one that could be most successful."
It is not clear how wide that band would be or how the ECB would then decide when to intervene in the bond markets to bring down the borrowing costs.
A further point under discussion is whether such a band would be tied to bond yields - their absolute interest rate levels - or bond spreads, the difference between a country's debt compared to the benchmark German bonds.
11:22AM :
ALERT ISSUED:
New (Old) Horse Enters The Race, MBS Back To Lows
RTRS - - ECB CONSIDERING SETTING YIELD BAND TARGETS UNDER NEW BOND-BUYING PROGRAMME - CENBANK SOURCES
We've now seen headlines from Der Spiegel several days ago, then The Telegraph, then Die Welt, the Reuters among others all suggesting the ECB will put a cap on sovereign yields. So this most recent headline is not "new" news, yet markets have made some sharp "risk-on" movements as if they're hearing about it for the first time.
We're not sure why that is, but we are sure that it's stirred up the biggest volume pop of the day and has pushed MBS back down to their lows of the morning while TSY yields and stock prices are at their highs.
Negative reprice risk is back in play with Fannie 3.0's at 103-05. 10yr yields are up into the mid 1.67's.
We've now seen headlines from Der Spiegel several days ago, then The Telegraph, then Die Welt, the Reuters among others all suggesting the ECB will put a cap on sovereign yields. So this most recent headline is not "new" news, yet markets have made some sharp "risk-on" movements as if they're hearing about it for the first time.
We're not sure why that is, but we are sure that it's stirred up the biggest volume pop of the day and has pushed MBS back down to their lows of the morning while TSY yields and stock prices are at their highs.
Negative reprice risk is back in play with Fannie 3.0's at 103-05. 10yr yields are up into the mid 1.67's.
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.
Tom Schwab : "REPRICE: 3:45 PM - USBank Worse"
Matthew Graham : "REPRICE: 3:41 PM - Suntrust Worse"
Joel Marks : "Yesterday I posted regarding a client who had identity theft where someone else filed a false tax return under her name. As a result, the tax transcripts were jacked up and the lender said the file was dead. MND member Bill Laffey emailed me directly to tell me what he did in the same situation just last week. Well, I took his advice, pushed back on the lender which contacted the investor and the deal is back on. Thank you Bill and MND!!!"
Chip Harris : "REPRICE: 3:11 PM - Sierra Pacific Worse"
Steve Chizmadia : "REPRICE: 3:08 PM - Pinnacle Worse"
Brandon Blue : "REPRICE: 2:37 PM - Interbank Worse"
Jason Adams : "REPRICE: 2:08 PM - Everbank Worse"
Mike Nondarakse : "Just received a notice that Wells Fargo Funding (correspondent) will begin purchasing only DU Refi Plus
refinances of Wells Fargo serviced Loans starting Sept. 24, 2012."
Chip Harris : "REPRICE: 1:55 PM - FPF Wholesale Worse"
Chip Harris : "REPRICE: 1:55 PM - Stearns Lending Worse"
Chip Harris : "REPRICE: 1:32 PM - Sun West Mortgage Worse"
Lea Shaw : "REPRICE: 1:08 PM - Caliber Funding Worse"
Lea Shaw : "REPRICE: 1:07 PM - Nexbank Worse"
Jason Adams : "REPRICE: 1:07 PM - Flagstar Worse"
Chip Harris : "REPRICE: 12:49 PM - 360 Mortgage Worse"
Chip Harris : "REPRICE: 12:48 PM - Fifth Third Mortgage Worse"
Matthew Graham : "RTRS- BERNANKE SAYS CONFIDENT FED HAS THE TOOLS TO NORMALIZE STANCE OF POLICY AT APPROPRIATE TIME AS RECOVERY IMPROVES "
Jason Nugent : "REPRICE: 12:09 PM - Chase Worse"
Matthew Graham : "RTRS- BERNANKE SAYS LAGGED EFFECT OF MONETARY POLICY REQUIRES FED OFFICIALS TO SET POLICY BASED ON FORECASTS "
Matthew Graham : "RTRS- BERNANKE, IN LETTER TO HOUSE PANEL, SAYS THERE IS SCOPE FOR FURTHER ACTION BY THE FED TO EASE FINANCIAL CONDITIONS, STRENGTHEN RECOVERY "
Chris Kopec : "Ira....nice tip on converting the charts to pdf...thanks."
Matt Hodges : "locked two with WF this morning...clients happy"
Kent : "REPRICE: 11:54 AM - Wells Fargo Worse"
Ira Selwin : "Right click on the charts and there are plenty of options. My favorite being the interactive PDF"
Chris Kopec : "Seriously though, you can pull up long term charts, screen print, and email it to them with commentary, either my own and/or MBS Live comments."
Jeff Anderson : "Interesting article on how the home prices in France & Spain haven't hit bottom yet. http://www.fool.com/investing/general/2012/08/16/1-graph-to-put-europe-in-perspective.aspx"
Kunal Khanna : "Chris, How do you share the charts?"
Chris Kopec : "People see the flashing charts and think I am The Man."
Chris Kopec : "In that case, float them, Jason, but make them aware of fluctuations. I use MBS charts to show the client exactly what has happened over the last day/week/month."
Bromi Krock : "then let them float it is their call"
Jason Adams : "I have all but two loans locked. Both clients want to float looking for an extra .25% by closing"
Rob Clark : "REPRICE: 11:42 AM - Provident Funding Worse"
Matt Hodges : "lock if you and client like your rate"
Chris Kopec : "Jason, I'm probably the outlier.....I'm extremely lock-biased."
Jason Adams : "curious the lock guidance you are giving on 45 day closing? is the community lock sentiment pretty accdurate to the ones in chat? "
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