MBS RECAP: Friendly Morning, Unfriendly Afternoon, Generally Positive On The Week

By: Matthew Graham
MBS Live: MBS Afternoon Market Summary
Bond markets cruised casually weaker in the overnight session as stocks were flat, both holding narrow ranges and nonplussed to the extreme.  Treasuries and MBS opened up just slightly weaker and began rallying in the morning with 10's hitting resistance at 1.66 and MBS at 105-12.  Both traded aimlessly from there until a decent-sized stock sell-off began just after 11am and bond markets gave chase in the form of lower yields and higher prices.  It was, quite simply, a boring "risk-off" rally.  Once the risk-off momentum had clearly run it's course, everything reversed in unison, with MBS taking the biggest hit in that process thanks to a good day of supply from originators and less bid-side support on a Friday afternoon.  When all was said and done, MBS  still managed to hit the 3pm mark down only 2 ticks on the day, and up about half a point on the week.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
105-07 : -0-02
FNMA 3.5
106-19 : -0-02
FNMA 4.0
107-09 : -0-01
FNMA 4.5
107-32 : -0-02
GNMA 3.0
106-28 : -0-01
GNMA 3.5
108-30 : -0-01
GNMA 4.0
109-15 : +0-02
GNMA 4.5
109-06 : -0-03
FHLMC 3.0
105-03 : -0-02
FHLMC 3.5
106-14 : -0-02
FHLMC 4.0
106-29 : -0-01
FHLMC 4.5
107-08 : -0-01
Pricing as of 4:04 PM EST
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: More Pronounced Negative Reprice Risk As MBS Make New Lows
Good, old-fashioned Friday afternoon sell-off folks. Treasuries are leaking higher and MBS even more so. Markets aren't moving in reaction to news or events. Rather, these are positional adjustments at the end of the week in relatively light volume (which exaggerates the effects of each dollar traded), late in the day when light liquidity allows mini-snowballs to get rolling faster and with less justification than almost any other time of the week.

MBS had returned to the morning's sideways range until just after 1pm, and then began to slip. In the past few minutes, they've slipped further, with Fannie 3.0s now down 6 ticks on the day to 105-03. While these are still decent levels for the week, they're more likely to result in negative reprices from a few lenders (unless we get a BIG bounce VERY quickly).
2:02PM  :  ALERT ISSUED: MBS Hit Lows. Negative Reprice Risk Increases
Though technically not "session lows" Fannie 3.0s are at their lowest levels since the first few minutes of the session, back to unchanged now at 105-09. For some lenders, this is at least 4 ticks weaker than prices that prevailed when the first rate sheets of the day came out.

This increases negative reprice risk though we wouldn't expect a mass exodus from today's rates considering we continue to rest on a pivot point at yesterday's best levels. In other words, some lenders might reprice for the worse here, but not it's not a foregone conclusion unless we dip more meaningfully into yesterday's range.
12:59PM  :  ALERT ISSUED: After Late Morning Spike, MBS Fall Back In Line
Starting at 11:10am, Equities and the Euro sold off and domestic bond markets rallied (seemingly in response to the equities-led sell-off). The spike down for equities could be chalked up to several potential factors including a think tank report that suggests the ESM can't fund a Spanish bailout this year and simpler events like the European market close or tradeflows/technicals (both S&Ps and the Euro broke technical supports on the move and several large trade tickets popped up between 11:10 and 11:30 in several markets.

Whatever the case, it's clear that the herd was spooked by something at 11:10, and the ensuing trading was temporarily beneficial for MBS. Fannie 3.0s spiked to 105-18 before falling perfectly back in line with the existing sideways trend du jour (roughly 105-11 to 105-14).

With Europe out for the day now and lunch time rolling across the states, it's fair to expect volumes to continue to dwindle unless some serious inspiration makes an unexpected appearance. As volumes dwindle, we'd HOPE to see the sideways grind merely, well... grind sideways right on out the door, but late day liquidity can be a problem for MBS, so don't tune out just yet if you're on the fence with a lock.

On a final note, if you do happen to be on the fence with a lock, keep in mind that origination volumes are naturally higher this morning as originators take advantage of the best price levels of the week and an extra bit of welcome relief from stagnant pricing earlier in the week. Some lenders can actually reprice negatively in such situations in order to throttle inbound lock volume. This is uncommon, but it does happen on some Friday afternoons among a few lenders.
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: 3:16 PM - Interbank Worse"
rford  :  "REPRICE: 12:34 PM - Stearns Lending Better"
Matthew Graham  :  "RTRS - LACKER SAYS, IF FED IS TO PURCHASE MORE ASSETS, WOULD PREFER IF IT BOUGHT TREASURIES "
Jason York  :  "if jsut on the deed, they should be able to come off, since they weren't used to qualify for the original mortgage"
Ted Rood  :  "If on mortgage, person staying on loan has to have paid the last 6 months out of an individual account, has to income qualify with just their income."
Jason York  :  "are they just on the deed, or on the mortgage also?"
MMNJ  :  "I believe if it is non-credit qualifying then no the other spouse cannot come off the deed"
Dirk Postupack  :  "On a FHA streamline refi, can spouse come off of the deed?"
Matthew Graham  :  "it doesn't have a text label, but it's one of the buttons (several horizontal lines) underneath the top row of analytics. If you hover your mouse over those icons, they'll tell you what they are"
Gabe Bristow  :  "Is there a way to put the % numbers on the Fib retracements in the adv. charts section? Thanks"
Matt Hodges  :  "i can give you the VA statute to base legislationon"
Steve Chizmadia  :  "Thad would be awesome MH"
Jason Harris  :  "Plenty of subs....seems like everybody 2007 or earlier took out a HELOC/2nd at some point"
Matt Hodges  :  "you should consider asking a Cali senator or rep to carry an autosubordination bill for you"
Steve Chizmadia  :  "I feel like 1 out of every 3 of my refi files right now has a subordination we need to process."
Steve Chizmadia  :  "Out of curiousity have you guys had more refi transactions with subordinations as of late? "
Matthew Graham  :  "RTRS - WELLS FARGO CEO SAYS THE BANK HAS BEEN ADDING PEOPLE TO HANDLE MORTGAGE VOLUME INCREASE "
Matthew Graham  :  "RTRS- WELLS FARGO CFO SAYS MORTGAGE VOLUME IS UP SO FAR IN THE FOURTH QUARTER COMPARED TO THE THIRD QUARTER "

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