MBS RECAP: Eerily Quiet And Sideways to Start the Week
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
Starting at noon, MBS have held inside a two tick range between 104-07 and 104-09 with eerie regularity. These were the same highs seen earlier this morning and represent a bit of an improvement from Friday's latest levels. This afternoon range in MBS is most infamous for its role as the mid-month low in December and as a supportive floor that followed the initial FOMC-related sell-off last Thursday. Of course prices moved lower after hitting that initial floor, but at this point, we've recovered that "late Thursday through Friday morning" slump. That's sort of good, but sort of ominous in the sense that we'd like to be breaking through mid-December lows and post-sell-off support, or else they take on that role of a negative inflection point (yesterday's floor, today's ceiling, etc...).
But it's not quite as ominous as it might seem at first. In fact, it's a good illustration as to why it makes more sense to follow the technical developments in Treasury markets for bigger-picture shifts. Like MBS, Treasuries are also revisiting past levels of significance today, but unlike MBS, they've done so in a supportive way, using the 1.916 level as a ceiling. On Friday, it was a firm floor that offered resistance for improving yields in the morning. For perspective, that's a shorter term look-back than considering MBS's attempt to get back above mid-Decemeber lows, but sadly, Treasuries aren't even close to their weakest mid-December levels near 1.85. Bottom lines: markets were quiet today. There are some ways to look at it in a hopeful light, while other perspectives are more ominous. That speaks well to the indecision that seems to pervade bond markets to start the week. It's too soon to tell and still anyone's game.
But it's not quite as ominous as it might seem at first. In fact, it's a good illustration as to why it makes more sense to follow the technical developments in Treasury markets for bigger-picture shifts. Like MBS, Treasuries are also revisiting past levels of significance today, but unlike MBS, they've done so in a supportive way, using the 1.916 level as a ceiling. On Friday, it was a firm floor that offered resistance for improving yields in the morning. For perspective, that's a shorter term look-back than considering MBS's attempt to get back above mid-Decemeber lows, but sadly, Treasuries aren't even close to their weakest mid-December levels near 1.85. Bottom lines: markets were quiet today. There are some ways to look at it in a hopeful light, while other perspectives are more ominous. That speaks well to the indecision that seems to pervade bond markets to start the week. It's too soon to tell and still anyone's game.
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.
2:05PM :
MBS Grinding Steadily At Highs, Slight Chance Of Reprices
To be clear, at least one positive reprice has already come across, and the possibility lingers as MBS continue to trade a narrow range at their highs of the day. All that having been said, those highs aren't even an eighth of a point higher than the levels that prevailed during most lenders' rate sheet print times. That means we're limited to a small subset of lenders who tend to offer "stability reprices."
Although those types of reprices aren't necessarily the kind of thing we'd hold our breath for, neither is the market selling off or even displaying any tendency toward weakness at the moment. That said, it's not displaying a tendency toward much at all! Prices have moved maybe 1 tick in either direction since before noon--10yr Treasuries, less than .5bps in either direction over the same time.
Meanwhile, stocks are falling, but haven't dipped below Thursday's levels. That's something that 10yr yields are only dreaming of at the moment. Bottom line, there's a sense that markets are holding their collective breath, waiting for the other shoe to drop.
Conclusions:
On the positive side, at least we're in the green. On the negative side, MBS have stopped making gains (which was laid out as a possible 2-day trend after fresh 2-day highs this morning) and instead have been bumping their head into a 104-09 ceiling in Fannie 3.0s. Same story with 10yr yields, but "floor" instead of "ceiling." 10's version of resistance is roughly 1.89.
Although those types of reprices aren't necessarily the kind of thing we'd hold our breath for, neither is the market selling off or even displaying any tendency toward weakness at the moment. That said, it's not displaying a tendency toward much at all! Prices have moved maybe 1 tick in either direction since before noon--10yr Treasuries, less than .5bps in either direction over the same time.
Meanwhile, stocks are falling, but haven't dipped below Thursday's levels. That's something that 10yr yields are only dreaming of at the moment. Bottom line, there's a sense that markets are holding their collective breath, waiting for the other shoe to drop.
Conclusions:
On the positive side, at least we're in the green. On the negative side, MBS have stopped making gains (which was laid out as a possible 2-day trend after fresh 2-day highs this morning) and instead have been bumping their head into a 104-09 ceiling in Fannie 3.0s. Same story with 10yr yields, but "floor" instead of "ceiling." 10's version of resistance is roughly 1.89.
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.
Matt Hodges : "there can be quite a discrepancy amongst MI companies, CS, plus they credit u/w, so you could get worse pricing on fico, reserves, etc"
Matt Sullivan : "REPRICE: 3:17 PM - Fifth Third Mortgage Better"
Nate Miller : "Clayton check: http://www.radian.biz/page?name=MIRateFinder"
Clayton Sandy : "Doing some comparisons on conventional MI. What do you guys pay for your MI? Assuming 95% and 740 credit."
Matt Hodges : "ask if exempt, though. Many more vets are now being granted disability, which waives FF"
Matt Hodges : "you pay 3.3% typically 2nd time"
Clayton Sandy : "they'll be subject to the higher funding fee the second time around (assuming they're not exempt and they're not putting money down)"
Ted Rood : "Question for the VA purchase experts in the room: If you use 75K of your 100K entitlement on a purchase, then sell that home and buy another, is your entitlement reset (since VA no longer guarantees old loan), or are you limited to the unused portion of the original entitlement??"
Christopher Stevens : "REPRICE: 2:13 PM - Chase Better"
Adam Quinones : "wires are quiet. "
Ted Rood : "More importantly, would it matter? First one didn't seem to."
Timothy Baron : "I think Moody's tossed that possibililty out there."
Andy Pada : "do we face another downgrade from the ratings agencies?"
Jeff Weaver : "not a lot of hope for it not going down to the wire, but that makes sense, thanks!"
Matthew Graham : "As an aside, it's worth noting that the last iteration of debt ceiling drama had a relatively small effect on bond markets in light of other, more pressing matters (Euro zone was starting to get ugly, Fed unveiled "2013 verbiage" a few days later. In that context, the debt ceiling debate in July/August 2011 looked completely overdone and with the benefit of hindsight was written off as political posturing with little material consequence. I don't know if things will be any different this time "
Matthew Graham : "investor confidence in the US's ability to handle it's business is important. If that "business" is handled in such a way that spending is cut by enough to cause growth concerns, then there could also be a moderate benefit for bond markets there as well. "
Matthew Graham : "Any situation that doesn't go down to the wire is relatively more beneficial to rates than one that does."
Jeff Weaver : "under what scenario would the debt ceiling debate be beneficial to mortgage rates?"
Rob Clark : "REPRICE: 12:09 PM - Provident Funding Better"
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