MBS RECAP: Biggest Rally Since Italian Elections Barely Makes A Dent
By:
Matthew Graham
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MBS Live: MBS Afternoon Market Summary
If you're a fan of high MBS prices and low rates, how depressing is it to consider that today's rally was the best we've seen in over two weeks, leaving us at the third lowest closing price since before QE3 and barely making a dent in rate sheets? Well, maybe it's not depressing, but it's not terribly exciting either. It would be more exciting if the strength looked more like a material bounce back against the post-NFP sell-off or the longer term trend higher in rates. While it could indeed end up looking that way, today's Treasury and MBS trading look much more like the 2nd day of a post-NFP consolidation. Cases in point: 10's bounced firmly on pre-NFP technical levels, volume only rose by an obligatory "Tuesday is one more day after Monday" amount, short-covering extended a bid for Treasuries even as the impetus (overnight UK "Gilts" and German "Bunds") headed back in the other direction, and mortgage lenders kept pricing more steady than the day/day changes in MBS would seem to suggest. The moral of the story is that markets did more to get in position for the headier data and events of the week than they did to embark on a new and possibly fantastic voyage. If Retail Sales disappoint tomorrow and the 10yr Auction is healthy, it would look more fantastic.
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.
1:46PM :
MBS At Highs Though Ranges Remain Narrow
Treasuries have cut a linear path back to the doorstep of Friday's NFP sell-off. In the hours leading up to Friday's NFP, 10yr yields broke above 2.012 around 6:30am and with only one brief exception, never made it back below. 2.012 came into play again today as the lowest yield seen just before the noon hour.
This raised some back-of-mind concerns that it could again act as resistance and offer some motivation for afternoon weakness. Thus far, this hasn't been the case as 10's retraced only to 2.0260 and are slightly lower at the moment at 2.0226 . Equities markets are forming consolidative triangles right in line with Friday afternoon's highs, ostensibly for a break toward yesterday's lows or highs by today's close.
MBS continue to underperform day-over-day but have seen steady gains in a narrow range. Fannie 3.0s are up 8 ticks in today, cutting a 4 ticks range from 102-07 to 102-11. The current stability and moderate gains are entering territory that suggests a positive reprice or two, though we'd emphasize that this is less likely than the charts might make it seem (due to the narrow ranges). We also have a cautious eye on 10's unwillingness to break pre-NFP technical levels.
The stock lever hasn't been overly connected today, but the bounces at the lows of the day (in TSY yields and stock prices) did coincide. The eventual break out of this mid-day triangle in equities could be the next source of guidance for indecisive bond markets.
This raised some back-of-mind concerns that it could again act as resistance and offer some motivation for afternoon weakness. Thus far, this hasn't been the case as 10's retraced only to 2.0260 and are slightly lower at the moment at 2.0226 . Equities markets are forming consolidative triangles right in line with Friday afternoon's highs, ostensibly for a break toward yesterday's lows or highs by today's close.
MBS continue to underperform day-over-day but have seen steady gains in a narrow range. Fannie 3.0s are up 8 ticks in today, cutting a 4 ticks range from 102-07 to 102-11. The current stability and moderate gains are entering territory that suggests a positive reprice or two, though we'd emphasize that this is less likely than the charts might make it seem (due to the narrow ranges). We also have a cautious eye on 10's unwillingness to break pre-NFP technical levels.
The stock lever hasn't been overly connected today, but the bounces at the lows of the day (in TSY yields and stock prices) did coincide. The eventual break out of this mid-day triangle in equities could be the next source of guidance for indecisive bond markets.
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.
Dan Crowley : "REPRICE: 3:35 PM - Franklin American Better"
Eric Franson : "REPRICE: 3:26 PM - Wells Fargo Better"
Victor Burek : "definitely floating overnight"
Brent Borcherding : "Plus 10 yr auction tomorrow...I'll have my finger on the trigger at 10 PST"
Lynn ONeal : "we havent really see them yet in rate"
Brent Borcherding : "No"
Tim Mitchell : "anyone locking in today's modest gains?"
Jason Anker : "correct - FHA will also allow"
Gus Floropoulos : "so fmna allows it but there may be an overlayt with the investor?"
Jeff Statz : "New DU Clarification: https://www.fanniemae.com/content/tool/du-clarification-foreclosure-preforeclosure-sale.pdf"
Bromi Krock : "should be fine uless there is an overlay"
Jason Anker : "yes FMNA does not require 2 yr history - thats an overlay"
Gus Floropoulos : "Scenario: First time buyer is buying an investment 2 family, can we use the rental income to qualify?"
Andrew Russell : "Imagine what 102-12 will feel like Ted!"
Ted Rood : "102 11 hasn't looked this good in a year!"
B-C : "I would love it more if some reprices came along with it"
Dena Zeman : "loving the green today!"
Dez Loessberg : "Rally time!!!"
Matthew Graham : "RTRS - U.S. 3-YEAR NOTES BID-TO-COVER RATIO 3.51, NON-COMP BIDS $46.90 MLN "
Matthew Graham : "in other news: RTRS - U.S. SELLS $32 BLN 3-YEAR NOTES AT HIGH YIELD 0.411 PCT, AWARDS 50.25 PCT OF BIDS AT HIGH "
Matthew Graham : "RTRS - SENATE BUDGET PROPOSAL WOULD SPEND $100 BLN FOR INFRASTRUCTURE PROJECTS, WORKER TRAINING, JOB CREATION-SOURCE "
Matthew Graham : "RTRS- SENATE BUDGET PLAN WOULD PRESERVE MEDICARE, MEDICAID PROGRAMS IN CURRENT FORM, SEEK $275 BLN IN OTHER HEALTH SAVINGS-SOURCE "
Matthew Graham : "RTRS - SENATE DEMOCRATS' BUDGET BLUEPRINT WOULD RAISE TAXES ON THE WEALTHY, LARGE CORPORATIONS BY CLOSING TAX DEDUCTIONS, LOOPHOLES-SOURCE "
Matthew Graham : "RTRS - US SENATE DEMOCRATIC BUDGET SEEKS $1.85 TRILLION IN ADDITIONAL DEFICIT REDUCTION THROUGH EQUAL MIX OF SPENDING CUTS, TAX HIKES-SOURCE "
MMNJ : "Jim, I can do a MH for Freddie OA"
Jason Harris : "Jim...I can but only for PNC serviced"
Curt Sandfort : "AFR"
Jim Begley : "Hate to ask, but do any brokers out there know of a lender that will do a HARP loan on a manufactured home? Loan is owned by Freddie."
Steve Chizmadia : "Steve Fishman is in Ohio"
Jason Harris : "Anybody able to assist with a non-credit qualifying FHA stream in Ohio....need without appraisal as well"
John Tassios : "Matt: just got back and saw your comment / I agree / there is a lot that CFPB and for that fact Dodd-Frank has not thought through / that is why mortgages and in general housing sales are still not up to par"
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