MBS MID-DAY: Holding Ground Ahead of Treasury Auction
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
After overnight weakness in bond markets (both foreign and domestic), Treasuries plodded back to unchanged territory. 10yr yields had been as high as 2.235 during Asian trading. There was a good bit of volatility in the first hour, but that's since calmed down as we approach the 5yr Note Auction at 1pm. MBS are breathing a bit of a sigh of relief relative to their melt-down yesterday, simply as a result of the broader ground-holding (10's are hanging between 2.15 and 2.14). There hasn't been any significant economic data this morning, leaving markets to "trade it out" in the wake of yesterday's shake up. While MBS are definitely still showing signs of being shaken up, the baby steps have been constructive so far this morning, even if not blatantly bullish.
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.
9:49AM :
MBS in The Green as Treasuries Battle Back From Overnight Weakness
Treasuries were in rough shape overnight as Japanese markets pushed yields higher at the outset. After Japanese Government bonds hit two successive highs and USD/Yen hit 102.50 for the third time, US 10's moved dower from overnight highs of 2.235.
The European session brought predominantly volatility and offered some resistance to the overnight recovery. German Bunds have chopped around toward higher yields, but were only able to drag Treasuries up to 2.208 by the time domestic traders' screens began warming up.
Since then, we've improved by amounts that would--on any other day--be substantial. Today, however, it merely gets 10's back to the 2.135 to 2.167 range (currently 2.1439), where we've been bouncing around since 8am.
MBS trading is a mess of volatility with the actual price at any given moment being more of a moving target than a reliable indication of what something actually costs. With that grain of salt, Fannie 3.0s are up 3 ticks at the moment at 100-12 but have been actively bouncing between there and 100-08. Fannie 3.5's just broke even on the day at 103-16.
The key technical target short term is in 10's at 2.135, though if we do move lower than that, the upcoming 5yr Auction at 1pm could make for concessionary pressure. In other words, it's not uncommon to see some weakness in Treasuries (all things being equal) ahead of auctions. That said, the extent to which volatility is in play, any directional trend this morning and early afternoon could easily trump auction concession needs, either making selling even worse or keeping things green where they otherwise might not be.
The European session brought predominantly volatility and offered some resistance to the overnight recovery. German Bunds have chopped around toward higher yields, but were only able to drag Treasuries up to 2.208 by the time domestic traders' screens began warming up.
Since then, we've improved by amounts that would--on any other day--be substantial. Today, however, it merely gets 10's back to the 2.135 to 2.167 range (currently 2.1439), where we've been bouncing around since 8am.
MBS trading is a mess of volatility with the actual price at any given moment being more of a moving target than a reliable indication of what something actually costs. With that grain of salt, Fannie 3.0s are up 3 ticks at the moment at 100-12 but have been actively bouncing between there and 100-08. Fannie 3.5's just broke even on the day at 103-16.
The key technical target short term is in 10's at 2.135, though if we do move lower than that, the upcoming 5yr Auction at 1pm could make for concessionary pressure. In other words, it's not uncommon to see some weakness in Treasuries (all things being equal) ahead of auctions. That said, the extent to which volatility is in play, any directional trend this morning and early afternoon could easily trump auction concession needs, either making selling even worse or keeping things green where they otherwise might not be.
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.
Michael Gillani : "Is anyone else failing to see the reflection of these supposed spiking home values on appraisals? We're in the midwest, but appraisals are still coming in at the same leves they were 6 months ago. As a matter of fact, I just had an appraisal in a very good area and upscale neighborhood come in 5% less than it appraised for in Nov. of 2012. I'm not saying things haven't stabled out in most areas or even gotten a little better in some, but I'm definitely not sold on this blanket "values are bac"
Tim Mitchell : "it's a good feeling having my entire refi pipeline locked, a lot of that I owe to some very rational conversations from this board. I used to float a lot more than I do now. "
Christopher Stevens : "Wells revised sheet just released. Initial sheet was approx. .152 better than yesterday and revised sheet is only .056 better than yesterday."
Michael Gillani : "We'll get some pushback this week from borrower's that refuse to accept the reality of higher rates"
Christopher Stevens : "only a very small blip in the WSJ also"
Mike Drews : "so did everyone hear what the TV media reported about the increased mortgage rates?"
Christopher Stevens : "I got initial rate sheet at 9:25 and then just reciebed email that pricing declined... Price Change - Effective 05/29/13 @ 8:30 AM CT
Pricing Generally Declined
"
Ted Rood : "How can you reprice worse when you probably put out rates 5 minutes ago??"
Victor Burek : "wells priced and has now repriced worse?"
Matt Hodges : "worse or initial pricing"
Christopher Stevens : "REPRICE: 9:34 AM - Wells Fargo Worse"
Brent Borcherding : "Yeah, this is gonna have a pretty big effect....at least for the shrot term."
Gaius Rossini : "applications at least, not closings necessarily. mba survey this morning was the lowest of the year"
Gaius Rossini : "have volumes dried up into the selloff?"
Jeff Anderson : "Hopefully we have a fight on our hands today. Keep the gloves up MBS' and treasuries. Don't lay down like the last few weeks."
Jeff Anderson : "Baby steps, Mr. Red. I'm happy the 10 year is down from the o/n high of 2.23 to 2.15."
Mike Drews : "so how many "tough conversations" did we have yesterday?"
Sung Kim : "and if mbs were up +16 today, it still wouldn't make yesterday any less painful - ugh"
MMNJ : "on any other day, MBS would be up +16 on that news"
Jeff Anderson : "For Germany's u/e. Wow."
Jeff Anderson : "GM, all, VB, Mr. Red. So the 6.9 u/e rate is just above a 2 decade LOW of 6.8%? Low? "
Victor Burek : "And eurozone growth cut"
Victor Burek : "German unemployment increases 4 times more than expected, UK retail sales fall to lowest since January 2012. China growth forecast cut. Hopefully those help too"
Victor Burek : "Stock futures moving lower, hope that helps"
William Hansen : "Some articles I read last night they will have to start coving shorts at 2.20. "
Peter Bethke : "agreed...hopeful there is some floor of support at 2.4 as well"
John Rodgers : "at 2.4"
Mike Drews : "2.2?...when do we stabilize?"
William Hansen : "10yr over 2.20. Another great day ahead. "
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