MBS RECAP: Further Gains Amid Another Uninspired Session
By:
Matthew Graham
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MBS Live: MBS Afternoon Market Summary
If we must be "drifting" at the moment, there are certainly worse ways to go about it. The current drift has seen MBS trade tight rangesevery day this week--much tighter than we'd expect, in fact, given the massive volatility at the end of last week. It's not that massive volatility wasn't to be expected if the Fed ended up announcing MBS-specific QE3 (which they did). It's just that we would have expected things to wind down in a bit more linear a fashion that the abrupt drop-off in volatility that we've seen. Today was the widest trading range of the week at 10 ticks, but even without an unprecedented Fed announcement targeted at MBS--even without anything very meaningful at all happening for mortgage markets, this would STILL be a narrow trading range. Current lines of support for Fannie 3.0s are at 104-00 and 104-10. Trading between the two would put us on guard, but anything over is cruise control.
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.
2:30PM :
ALERT ISSUED:
MBS Back Near Highs After Late Morning Bounce
After sliding a bit earlier this morning, Fannie 3.0s were able to find their footing around short term technical level of 104-10, essentially a pivot with yesterday's highs (also was initially supportive last Friday before the sell-off began).
Ranges remain narrow, however, and the bounce back only brings prices to 104-15, which are generally in line with this morning's rate-sheet print times.
10yr yields made a run into the 1.79's but have also bounced back and similarly languish in the midst of their late morning/early afternoon range. Trading has grown progressively less inspired, and we see little moving markets outside of observing and reacting to tradeflows.
As such, there's not much to do except keep an eye on ranges, and mostly with respect to the lower end of the range at 104-10. It continues to be the case that this is the line in the sand for negative reprice risk whereas positive reprice potential is really anyone's guess. Some lenders might already be considering it due to the stability, but incentive for such things is generally limited when rates are already at all-time lows.
Ranges remain narrow, however, and the bounce back only brings prices to 104-15, which are generally in line with this morning's rate-sheet print times.
10yr yields made a run into the 1.79's but have also bounced back and similarly languish in the midst of their late morning/early afternoon range. Trading has grown progressively less inspired, and we see little moving markets outside of observing and reacting to tradeflows.
As such, there's not much to do except keep an eye on ranges, and mostly with respect to the lower end of the range at 104-10. It continues to be the case that this is the line in the sand for negative reprice risk whereas positive reprice potential is really anyone's guess. Some lenders might already be considering it due to the stability, but incentive for such things is generally limited when rates are already at all-time lows.
11:29AM :
ALERT ISSUED:
MBS Down Roughly An Eighth From Rate Sheet Time
Bond markets have been better-sold since the conclusion of the Fed's scheduled Buyback in the 25-30yr maturity range. With the recently better connection between Treasury benchmarks and MBS, that has Fannie 3.0s down to 104-11. While this is still 7 ticks higher on the day, depending on the lender, it could be as much as 5 ticks lower since rate sheet time and about 3 ticks lower from the average prices around average rate sheet generation times.
While this isn't necessarily a big enough move to get many lenders thinking about a negative reprice, any significant movement below these levels could be for a few of them.
10yr yields are up to 1.784 after hitting 1.765 earlier and Stocks have advanced to new 2-day highs. We're seeing some signs that bond markets might dig their heels in for a bounce here, so we might watch and wait for the bounce to continue developing and simply remain guarded against a break below 104-10.
While this isn't necessarily a big enough move to get many lenders thinking about a negative reprice, any significant movement below these levels could be for a few of them.
10yr yields are up to 1.784 after hitting 1.765 earlier and Stocks have advanced to new 2-day highs. We're seeing some signs that bond markets might dig their heels in for a bounce here, so we might watch and wait for the bounce to continue developing and simply remain guarded against a break below 104-10.
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.
Ted Rood : "Can you say depression? And not the kind you treat with Zoloft either."
Andrew Horowitz : "can you imagine the panic the market would have if the fed announces a quantitative tightening "
Adam Quinones : "MND said that two years ago!"
Andrew Horowitz : "i have wondered about the exit strategy as well Jeff, the best strategy might be to just let the bonds unwind and hand the cash over to the tsy dept"
Jeff Anderson : "It was interesting when he said he doesn't EVER see an exit strategy from the Fed."
Matthew Graham : "i think it's a simple matter of audience. he's talking to investors looking for return whereas we're just thinking about outright levels as opposed to ROI"
Brent Borcherding : "I know, JA. Just trying to spark conversation."
Jeff Anderson : "Don't tell me, BB. I get that. Tell the new Bond King."
Brent Borcherding : "No, it isn't a good investment, but people invest there because it is highly liquid and they feel 100% confident they will get their money back. Massive global unrest, with more on the horizon, has many willing to search out certainty. The picture of uncertainty seems unlikely to change, soon."
Jeff Anderson : "His argument was it just isn't a good investment, basically. That's what I took from it. He does like MBS' though."
Brent Borcherding : "Why would treasuries go up in yield? I'd love to hear a compelling argument."
Matthew Graham : "Even Lacker bowed out of the inflation rant last night. Now I'm just waiting on Vic and a majority of the news media to acquiesce "
Michael Gannon : "because the economy certainly will not be that much better in the next year "
Michael Gannon : "i saw that but didnt hear what he was saying.....what was his reasoning on why it would go up? inflation?"
Christopher Stevens : "sees 10YR up 100bps in the next year"
Christopher Stevens : "Great interview with Jeffrey Gundlach (Barrons new Bond King) on CNBC"
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