MBS RECAP: NFP Fires! QE3 Shield Sustains Moderate Damage
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
Today's jobs report did a good amount of damage to broader bond markets, though MBS prices managed to withstand the barrage with more composure. This "relative outperformance" is a fair expectation given that the Fed's most recently announced quantitative easing measures provide an effective shield for MBS specifically in the form of an extra $40 bln a month in bid-side support. But as we've noted, the only thing truly guaranteed by Fed MBS purchases is that MBS stay nice and tight to Treasury benchmarks. If we embark on a big enough move higher in yield, mortgage rates still suffer. With a string of historically ugly Octobers behind us, the question of whether or not this one gets similarly ugly is set to be answered next week, and if it does, the strength of MBS's QE3 shield to be tested.
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.
2:29PM :
ALERT ISSUED:
MBS At Weakest Levels Since Before 9:30am
Fannie 3.0s have ticked down to 105-05, levels not seen since we were still working our way back up from the initial post-NFP sell-off before 9:30am. Prices weren't much higher during rate sheet generation time for most lenders, and rate sheets are generally fairly crappy today with respect to yesterday.
Still, we're more concerned in the trend, which has been exclusively lower this afternoon despite getting briefly back into positive territory around 12:30pm. A lot depends on the lender, their rate sheet timing, and past precedent with conservative pricing ahead of 3-day weekends, but at the very least, risks are elevated at the moment, even if trading levels don't justify widespread reprices.
Still, we're more concerned in the trend, which has been exclusively lower this afternoon despite getting briefly back into positive territory around 12:30pm. A lot depends on the lender, their rate sheet timing, and past precedent with conservative pricing ahead of 3-day weekends, but at the very least, risks are elevated at the moment, even if trading levels don't justify widespread reprices.
11:51AM :
ALERT ISSUED:
MBS Back In The Green Briefly, Outperforming Treasuries
It's not uncommon for MBS to outperform Treasuries into a sell-off, but the pace at which that's occurring today is surprising. Fannie 3.0s were remarkably UP 1 tick at 105-12 until moments ago, having fallen to 105-09. 10yr yields are almost 5bps higher on the day at 1.72.
Depending on the time of day that a rate sheet was released, the gains already set the stage for potential positive reprices, and we've seen a few reported already, but chances of additional reprices are waning as long as we're back in the red.
105-10 continues to be a good line in the sand to serve as a base of operations as we head into the afternoon. Moving up from there, positive reprice possibilities increase.
Negative reprices are a bit less certain and the levels at which they might occur, harder to gauge. For some lenders, it might require a revisit to the lows of the day, while the ledge of support at 105-04 would be reprice target for lenders who priced slightly later or more aggressively.
Depending on the time of day that a rate sheet was released, the gains already set the stage for potential positive reprices, and we've seen a few reported already, but chances of additional reprices are waning as long as we're back in the red.
105-10 continues to be a good line in the sand to serve as a base of operations as we head into the afternoon. Moving up from there, positive reprice possibilities increase.
Negative reprices are a bit less certain and the levels at which they might occur, harder to gauge. For some lenders, it might require a revisit to the lows of the day, while the ledge of support at 105-04 would be reprice target for lenders who priced slightly later or more aggressively.
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.
BVG : "REPRICE: 12:48 PM - Interbank Better"
Kent : "REPRICE: 12:07 PM - Franklin American Better"
Matt Hodges : "CS - USBank for both DURP & OA"
Christopher Stevens : "nyone have a bank they like sending their HARP (DU Refi Plus) to?"
Matthew Graham : "RTRS - OBAMA SAYS TODAY'S JOBS NUMBERS ARE NOT EXCUSE TO TRY TO "TALK DOWN" THE ECONOMY TO SCORE POLITICAL POINTS "
john murphy : "CS No biggie there. Happens every year. the FY roll. They're still underwriting. "
Curt Sandfort : "I hadn't heard until now that we were going to have an issue with purchases"
Curt Sandfort : "Stearns just informed me that: Fiscal year (FY) 2013 will begin on October 1, 2012. Purchase funds will not be available
for approximately two weeks or longer after the new FY begins. During this timeframe,
Rural Development will issue Conditional Commitments “subject to the availability of
commitment authority.” The FY 2013 upfront guarantee structure of 2 percent and an
annual fee of .40 percent will apply."
Jeff Anderson : "REPRICE: 11:19 AM - Chase Better"
Timothy Baron : "I'm going to do that. Was hoping for additional ammo before I call."
Matt Sullivan : "greentree subordination == nightmares"
Jason York : "i would call them and see if they have a cap, or if there is anything you could change to allow them to approve it"
Ken Crute : "i think several lenders have a cap on the increase of the new loan amount "
Timothy Baron : "Has anyone had an issue with Greentree not approving a subordination because the closing costs on a HARP2 loan are rolled into the loan amount? If so, did you have any success convincing them to allow it?"
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