Bond Markets Rally Big Following Another Hilsenrath FOMC Prelude

MBS Live: MBS Afternoon Market Summary

MBS and Treasuries had already been trading well into the PM hours--the stronger economic data of the morning was a surprisingly small speed-bump, as was the weaker-than-expected 30yr Bond Auction.  Indeed, some level of 'determination' was evident as far as the defense of yesterday's lows was concerned and the more eagerly fought technical battle soon revealed itself to be a challenge of yesterday's highs (or lows in the case of 10yr yields).  We bounced along the ceiling in MBS through the 3pm Treasury close (and along the floors in terms of yield) until a larger than normal spike in prices and volumes started to take shape around 3:40pm.  The spike quickly grew as word spread that Hilsenrath was out with another Fed preview piece, very similar in timing to the last major example on the Friday before a Fed week.  The predictive tone was similar--something he's known for--but in the opposite direction of the previous piece.  This time, the headline read: "Fed Likely to Push Back on Market Expectations of Rate Increase."  The fact that the thesis surrounded the Fed Funds Rate as opposed to quantitative easing likely kept the rally from getting out of control, but it did facilitate a technical break below the 2.18 level in 10's.  Still, markets likely traded the headline to a certain extent before reading the full text of the article, and assumed that it was not necessary in order to infer the goal of "moderation" recent move higher in rates.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.

3:55PM  :  ALERT ISSUED: Another Hilsenrath Tweet, Another Big Swing

3:42PM  :  ALERT ISSUED: Abrupt Buying in Treasuries; MBS Follow; Positive Reprice Potential

1:25PM  :  ALERT ISSUED: Volatility After Auction, Risks Shifting Positively For MBS

A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Ken Crute  :  "REPRICE: 2:20 PM - Everbank Better"

Rob Clark  :  "REPRICE: 2:14 PM - Provident Funding Better"

Roger Moore  :  "REPRICE: 2:07 PM - NYCB Better"

Matthew Graham  :  "AP, on auction days, I like to devote one pane in my screen to whatever the WI coupon of the day might be, today's 30's really tell a story of consolidation ahead of next week's FOMC, which is the general story elsewhere. http://screencast.com/t/PAudAQfGT"

Todd Hernandez  :  "REPRICE: 2:06 PM - Flagstar Better"

Chris Kopec  :  "Considering retail sales, weekly UE, lackluster 10 and 30 year auctions, and today's equity rally, I'm very happy with this afternoon."

Brent Borcherding  :  "We're through supply."

Andy Pada  :  "so why is this happening (other than my green tie)?"

Derek Nadvornick  :  "Paid out of buyer's own verified funds not with loan proceeds should not be of any concern to the underwriter if remaining reserves are acceptable. Who pays who is of no concern."

Michael Gannon  :  "the bank should be paying the listing agent. "

Michael Gannon  :  "we do buyer broker agreements all the time but the borrower pays to the selling agent not the listing agent"

Bryce Schetselaar  :  "I have a purchase contract on a short sale that is calling for the buyer to pay 1% in addition to the sales price for the listing agent's commission. Underwriter is not taking it. Are you guys seen this? And getting it through?"

Matthew Graham  :  "MBS should get some rays from that sunshine"

Matthew Graham  :  "technical break in 10s"

Matthew Graham  :  "big break lower in WI 30s"

Matthew Graham  :  "shortest term 2.196, shorter term 2.219"

Charles Tadros  :  "MG, what are we looking to hold at on the 10?"

John Rodgers  :  "MBS outperforming"

Matthew Graham  :  "and a 3.3bps tail isn't outrageous for 30's"

Andy Pada  :  "seem to be hanging in there for the moment"

Matthew Graham  :  "D"

Oliver S. Orlicki  :  "c?"

Matthew Graham  :  "RTRS - US TREASURY - PRIMARY DEALERS TAKE $6.66 BLN OF 29-YEAR 11-MONTH BONDS SALE, INDIRECT $5.23 BLN "

Matthew Graham  :  "RTRS - U.S. 29-year 11-month bond BID-TO-COVER RATIO 2.47, NON-COMP BIDS $3.47 MLN "

Matthew Graham  :  "RTRS - U.S. SELLS $13 BLN 29-YEAR 11-MONTH BONDS AT HIGH YIELD 3.355 PCT, AWARDS 47.11 PCT OF BIDS AT HIGH "

Troy Evans  :  "this is a pretty good rally into the auction. that's good news"

Matthew Graham  :  "Today is a reopening vs refunding. They tend to have lower BTCs, but much closer than 10's. Average is mid 2.5's. They've averaged higher-than-expected yields, but only half the time. current WI is 3.320"

Oliver S. Orlicki  :  "Auction time"

Phillip Mangham  :  "REPRICE: 12:44 PM - Wells Fargo Better"

Nate Miller  :  "REPRICE: 12:40 PM - Caliber Funding Better"

Matthew Graham  :  "you get credit or blame either way JA!"

Jeff Anderson  :  "28 mins to next leg of rally."

Todd Hernandez  :  "REPRICE: 12:30 PM - Chase Better"

Matthew Graham  :  "http://www.newyorkfed.org/markets/tot_operation_schedule.html"

Scott Rieke  :  "MG - know where I can get a list of POMO dates and expectations? Finally convinced big boss "tapering" isn't just noise. Impacts both mtg rates and potentially funding rates (if only short lived) and now he has all sorts of questions. Screech and wave your arms and finally you'll get noticed."

Jason Adams  :  "REPRICE: 12:10 PM - Franklin American Better"

Chris Kopec  :  "I agree with BVG on Advancial."

BVG  :  "Advancial was doing non-warrantable condos--- may still be."

Chris Kopec  :  "Jon....sounds like a portfolio lender would need to look at that....lots of standard condo questionnaire flags based on your write-up. I'll check my non-conforming inbox for suggestions and if I find someone I'll shoot you their contact info."

Rob Clark  :  "Thank you Nathan. Just sent. I need to fix my profile."

Jon Bodan  :  "Hey all, got a strange one. Condo building being converted from apartments to condos. Association is in force on 7/1. Mostly investor owned and on the front end of units being sold. It's in a college town so students' parents are buying the units or people are buying them to rent to students. I'm thinking this will be non-warrantable. Any recommendations on who might pick it up as a 2nd home or NOO? "

Read what our user's have to say about MBS Live on LinkedIn.

» Start a two week free trial of MBS Live.