MBS MID-DAY: More Directional Movement Today; New All-Time Highs
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
When Fannie 3.0s first started trading just under a year ago, they did so within a 1 point range of 99-00. Today they hit 105-00 for the first time ever despite flat to slightly weaker Treasury trading. As we noted this morning, MBS have been able to gradually get back to the levels of outperformance vs Treasuries seen in the immediate wake of the QE3 announcement. In general, we see MBS continuing to outperform Treasuries as long as Treasuries aren't making threatening gestures about big potential sell-offs. This jives well with a week where we've seen 10's ratchet lower from 1.82 and then 1.79. 10's started rising yesterday, but found support this morning at 1.79, and that's just the sort of thing we're saying MBS enjoy. Bottom line, supportive stability in benchmarks will allow MBS to continue to outperform. Granted, there are limits to this, but we've had some room to run between yesterday morning's widest recent spreads and the tightest spreads seen just after the QE3 announcement.
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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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.
9:30AM :
ALERT ISSUED:
MBS Outperforming Early Amid Lack Of Data, Treasury Weakness
After the initial show and awe of last week's QE3, MBS moved abruptly to their best-ever levels as well as their best-ever level of outperformance vs Treasuries. In other words, for any given Treasury yield, MBS yields were much lower.
That spread corrected moderately in the days that followed and began going more sideways, never rising above what had been best-ever levels before QE3 (in other words, it was still a record level of outperformance). But it increasingly looks like the "rising and flattening out" phenomenon was merely MBS way of "taking a breather" and letting Treasuries get caught up. The "flattening out" from Tuesday and Wednesday suggests markets found their short term boundary for MBS's trading relationship to Treasuries and have moved the other way (back toward outperformance) on Thursday and again this morning.
This degree of the outperformance isn't such that MBS will be able to have big, green days when Treasuries are well into negative territory, but on morning's like this where Treasuries are just barely weaker, MBS are able to be slightly stronger. It's been a calm and gradual process, but we're back to new all-time highs today in Fannie 3.0s, currently up 3 ticks on the day at 104-26.
10yr yields are still about 2.5 bps weaker after a choppy overnight session fueled by Euro-headlines. This is the only thing markets really had to go on given the utter absence of scheduled economic data and events. That continues to be the case although there's a scheduled Fed buyback at 10:15-11:00am, and of course the weekly ECRI numbers at 10:30 which we never mention because they never matter.
At the moment, though, the pressing concern seems to be the cash open for equities. On a slow day without data it's not unreasonable to expect a bit of correlation in "the stock lever," and to that end, equities look set to open higher and have been breaking above overnight highs in futures as the opening bell rings presently.
That spread corrected moderately in the days that followed and began going more sideways, never rising above what had been best-ever levels before QE3 (in other words, it was still a record level of outperformance). But it increasingly looks like the "rising and flattening out" phenomenon was merely MBS way of "taking a breather" and letting Treasuries get caught up. The "flattening out" from Tuesday and Wednesday suggests markets found their short term boundary for MBS's trading relationship to Treasuries and have moved the other way (back toward outperformance) on Thursday and again this morning.
This degree of the outperformance isn't such that MBS will be able to have big, green days when Treasuries are well into negative territory, but on morning's like this where Treasuries are just barely weaker, MBS are able to be slightly stronger. It's been a calm and gradual process, but we're back to new all-time highs today in Fannie 3.0s, currently up 3 ticks on the day at 104-26.
10yr yields are still about 2.5 bps weaker after a choppy overnight session fueled by Euro-headlines. This is the only thing markets really had to go on given the utter absence of scheduled economic data and events. That continues to be the case although there's a scheduled Fed buyback at 10:15-11:00am, and of course the weekly ECRI numbers at 10:30 which we never mention because they never matter.
At the moment, though, the pressing concern seems to be the cash open for equities. On a slow day without data it's not unreasonable to expect a bit of correlation in "the stock lever," and to that end, equities look set to open higher and have been breaking above overnight highs in futures as the opening bell rings presently.
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.
Curt Sandfort : "damn, I'm gonna have to cancel golf this afternoon and originate instead"
Matt Hodges : "my only lender even offering what might be 2.5, but all likely portfolio'd for some time period"
Matt Hodges : "WF this am: 3.25 -->3.125% +.625 3.125% ---> 3% +.875 3% ---> 2.875% +1 2.875% ----> 2.75% +1.125"
Adam Quinones : "2.5s will go live when theyre BestEx and dealers can roll 'em."
Christopher Stevens : "maybe a better question is what would be the tipping point to get liquidity in the 2.5"
Christopher Stevens : "we are only an 1/8th away in best ex from the bottom of the 3.00MBS...is there and build up in the 2.5 showing up? Most of my rates sheets have bottomed out at 3.250%"
Matthew Graham : "yeah and naturally we'd expect to see rate sheets not follow thr big swings in lock step after the announcement, but they've been able to gradually tighten up as the week goes by. (i'm still surprised how smoothly that's gone)"
Christopher Stevens : "MG- what I find interesting about the chart in your 'Day Ahead' this morning is that rates have reached all time lows (best ex 3.375) this week all while trading inside Fridays trading range. seems like a nice calm move upward has calmed traders a little. "
Jeff Anderson : "TGIF, all. The chart on the Day Aheah looks like we're taking the stairs up on MBS price. I like that. When is the Fed officially starting their additional $40mm MBS buying? Or did that start this week? "
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