MBS RECAP: Decent Data, Friendly Auction, Hope Stays Alive
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
Today was a pretty straightforward one as far as the bounce back from Tuesday's mega sell-off is concerned. There was a fair chance Tuesday's lows could serve to bookend the range heading into next week's NFP (laid out in The Day Ahead chart as the supportive red line), and a fairer chance still that friendly data and events today would continue in that vein after yesterday's well-behaved rally. On the data front, Jobless Claims were supportive, coming in weaker than expected and affording a slight boost at the open. Things easily could have gone either way at that point, though we'd imagine that we still would have leveled off--just that it would have been inside yesterday's range as opposed to slightly above it. Markets were again willing to trade the bulk of the day inside yesterday's range heading into the 7yr auction, but healthy results helped MBS into positive territory, even if only by a few ticks. All of the above is in line with a market that is simply staking out the best seats for next week's main event on Friday (NFP). There may be a few bathroom breaks or trips to the concession stand between now and then, but unless we drop the popcorn or run afoul of unsanitary conditions in the restroom, we generally know what's going to happen between now and then (i.e. pre and post sell-off levels acting as range suggestions from which trading levels consolidate or drift sideways, potentially favoring one side over the other).
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.
3:59PM :
Fed MBS Purchases May 23 - May 29
The NY Fed did not buy any Fannie 2.5s this past week compared to 100 million in the previous week. Fannies continued to run just under double Freddies ($6.15 bln Fannie vs $3.6 bln Freddie).
Ginnie Purchases stayed at $2.45 bln--same as last week--meaning that the GSEs accounted for the drop in total purchases from $15.3 bln to $12.2 bln. The drop is due to the holiday, but it is potentially interesting that it was concentrated in GSE issuance.
Ginnie Purchases stayed at $2.45 bln--same as last week--meaning that the GSEs accounted for the drop in total purchases from $15.3 bln to $12.2 bln. The drop is due to the holiday, but it is potentially interesting that it was concentrated in GSE issuance.
3:11PM :
ALERT ISSUED:
MBS Leaking Back Toward Morning Range
Don't let the scale of the two day chart lull you into a false sense of security. That's a 7 tick move lower from the highs of the day heading into 2pm. Fannie 3.0s are down 2 ticks on the day at 100-29 after previous highs of 101-04.
Is it likely to cause much negative reprice risk? Not yet, and not at all if we hold ground here, but we're heading in the wrong direction otherwise. We'll put out an alert if things slip below the consolidation mid-point from earlier this morning at 100-27.
For what it's worth, there's no significant piece of news or data driving the move lower--just late day trading conditions in MBS and a 10yr benchmark that looked somewhat serious about rejecting a break below 2.10, which then rapidly scooted inside yesterday's 3pm levels for today's 3pm close (TSYs and MBS will continue to trade from 3-5pm, but most market participants mark the close of Treasury trading at 3pm, when the bond pit closes).
Is it likely to cause much negative reprice risk? Not yet, and not at all if we hold ground here, but we're heading in the wrong direction otherwise. We'll put out an alert if things slip below the consolidation mid-point from earlier this morning at 100-27.
For what it's worth, there's no significant piece of news or data driving the move lower--just late day trading conditions in MBS and a 10yr benchmark that looked somewhat serious about rejecting a break below 2.10, which then rapidly scooted inside yesterday's 3pm levels for today's 3pm close (TSYs and MBS will continue to trade from 3-5pm, but most market participants mark the close of Treasury trading at 3pm, when the bond pit closes).
1:10PM :
ALERT ISSUED:
Well-Received 7yr Auction; First Reaction is Positive for MBS
The 7yr auction stopped through 1.7bps lower than expected (very healthy - 1.496 vs a 1.513 WI yield). The bid-to-cover ratio--a measure of overall demand--was similarly healthy at 2.71 vs a recent average of 2.63. All in all it was an "A/A-" in our view and a similar "A-" for the Rickster.
The first move for MBS and Treasuries has been--well... Healthy. Fannie 3.0s are up 3 on the day now and 10's are down a bp and a half to 2.103. Positive reprice risk is on the table if we hold these levels.
The first move for MBS and Treasuries has been--well... Healthy. Fannie 3.0s are up 3 on the day now and 10's are down a bp and a half to 2.103. Positive reprice risk is on the table if we hold these levels.
12:02PM :
ALERT ISSUED:
Heads Up: Lower Highs in MBS; Early Hints of Risk
Here's one of those 'alerts' that's not quite a full-fledged reprice alert--a "vigilance alert," if you will... In other words, the current situation merits caution, but actual negative reprice risk is still limited for all but maybe one lender. Even then, we'd give some credence to the fact that lenders generally did a good job of keeping pace with MBS losses on Tuesday and have a bit of breathing room when we're in a range that's nearly a point above the recent lows.
The slight increase in risk is due to the timing of initial rate sheets this morning. The first marks of the day were taken fairly close to highs in MBS and until a moment ago, we were 5 ticks off those highs.
5 ticks (or 5/32nds) would normally be just enough to justify some reprice risk, but for the aforementioned reasons, we're not sure it's as justified in the current environment. Any break back below 100-25 would increase risks just slightly for a few of the fast-acters/early-pricers, but we'd keep an eye on 100-23 in Fannie 3.0s as a more clearcut indication of broader reprice risk.
As of right now, we're holding in at 100-27 after the recent bounce at 100-25. On a final note, we're also eyeing the "lower highs" in MBS prices (and the "higher lows" in TSY yields). We'd want to see those trends broken before letting our guard down too much.
The slight increase in risk is due to the timing of initial rate sheets this morning. The first marks of the day were taken fairly close to highs in MBS and until a moment ago, we were 5 ticks off those highs.
5 ticks (or 5/32nds) would normally be just enough to justify some reprice risk, but for the aforementioned reasons, we're not sure it's as justified in the current environment. Any break back below 100-25 would increase risks just slightly for a few of the fast-acters/early-pricers, but we'd keep an eye on 100-23 in Fannie 3.0s as a more clearcut indication of broader reprice risk.
As of right now, we're holding in at 100-27 after the recent bounce at 100-25. On a final note, we're also eyeing the "lower highs" in MBS prices (and the "higher lows" in TSY yields). We'd want to see those trends broken before letting our guard down too much.
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.
Eric Franson : "REPRICE: 2:22 PM - Wells Fargo Better"
Charles Tadros : "REPRICE: 1:56 PM - Flagstar Better"
Michael Gannon : "if you don't need the reserves they are probably taking it out or they are a processor is going to get it and not telling you. It is 100% a Fannie thing"
Michael Gannon : "it is not investor specific. The DU calls for it on non harp deals. "
Sung Kim : "ah... here is the DU/DO message which triggers some to ask for terms of withdrawal "If the account allows
for withdrawals only in connection with the borrower's employment termination, retirement, or
death; or the account does not allow for any type of withdrawal, the retirement asset should not be
entered.""
Matt Hodges : "it may have been HomePath overlay"
Sung Kim : "mh - WF will do prior-approval on conforming stuff for you?"
Sung Kim : "pmac, wf typically dont on the correspondent side"
Sung Kim : "it's investor specific.. suntrust asks"
Matt Hodges : "Sung - i have a file with WF - prior approval - they are requiring it even though its only reserves... it might be lender specific"
Sung Kim : "DU does not ask for that unless money is used for closing"
Michael Gannon : "Jason how do you not when DU calls for the terms of withdrawal?"
Clayton Sandy : "All the time. Some 401K's don't allow for hardship withdrawals on anyting but your Primary Residence. So if you're trying to use them for an investment property, it won't work. Also, some people don't have access to their 401K's unless they are separated from their employer. "
Michael Gannon : "Caroline......DU calls for the terms of withdrawal so everyone should when using them as reserves"
Caroline Roy : "annoying. this one is a wells fargo advisors account and can't find squat on their website"
Matt Hodges : "i go to the Fidelity or whatever 401k company and print the w/d terms"
Jason Anker : "but i did when I was at Wells"
Lisa Alley : "Not for reserves, they usually just calculate at 60%"
Jason Sheaffer : "i have depending on the lender"
Matt Hodges : "yes"
Jason Anker : "no"
Caroline Roy : "do you guys get stipped for terms of withdrawal on retirement accounts in order to use them for reserves?"
Matthew Graham : "Moshe: http://mbslive.mortgagenewsdaily.com/knowledgebase/articles/198110-setting-up-reprice-alerts-and-other-updates"
Moshe Berg : "how do I set up getting an email for reprice alerts?"
Victor Burek : "check with your lender, but I haven't had an exceptable extenuating circumstance on any loan"
Victor Burek : "2yrs with documentable extenuating circumstances"
Dez Loessberg : "Question, any exceptions to the 4 year wait period for a chpt 7 BK for conventional?"
Matthew Graham : "MG2, here's a quick chart of what I was talking about re: ascending resistance at post-sell-off highs:
http://screencast.com/t/ephRklK5Y2KD"
Matthew Graham : "slightly ascending resistance line though. Not uncommon for post-sell-off consolidative moves"
Matthew Graham : "MG2, looks like resistance kicking in at Tuesday PM highs"
Michael Gillani : "Is this currently a little negative drift waiting on the 7yr auction?"
Andrew Horowitz : "http://blogs.barrons.com/incomeinvesting/2013/05/30/mortgage-bonds-slump-as-mortgage-reits-dump-them/?mod=barrons_msnhttp://online.barrons.com/article/BL-INCOMB-2575.html?"
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