MBS RECAP: Sideways Mission Accomplished. FOMC Tomorrow
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
The day is winding down with MBS and Treasuries in roughly unchanged territory vs yesterday's latest levels. Morning economic data proved to be a non-event in terms of market movement, and the key motivation of the day looks more like a gentle "letting down of the guard" put in place yesterday afternoon. In other words, prices improved in stocks and bonds alike, including MBS from just before 9am to just after 2pm. In general, both sides of the market give the impression that they're defensive about the prospects for tapering, but at current levels, are chomping at the bit to unwind some of that defensiveness in the absence of any taper tape bombs tomorrow. The Announcement itself is at 2pm, along with the member forecasts. If anything about those events fails to kick off momentum, the Bernanke Press Conference follows at 2:30pm (all times Eastern). Even if 2pm events get things moving, Bernanke's presser could still bring them back or give them a heartier push down the road. Unlike some Fed Days, every component has market moving potential, though fears surrounding the statement itself seem like the biggest factor in our current defensiveness. In other words, if the Fed doesn't trim asset purchases tomorrow, markets will likely assume they won't consider it again until the September meeting, and the Septemberists ascribing to that notion will likely be a bullish presence for rates in the intermediate term. So many things could happen though... So many wild cards... It makes more sense to watch and react at this point than to try to account for the multiple ifs/thens.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
|
|
|
||||||||||||
| Pricing as of 4:02 PM EST | ||||||||||||||
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.
3:35PM :
Rally Cooling. Stay Frosty
After rallying directionally from 11am, both Treauries and MBS have broken from those trends and gone sideways into 3pm. To be sure, some positive reprices may still be out there, but if you've already seen one, this is sort of a heads-up that you're not likely to see another one from the same lender. Also bear in mind that some lenders (only a select few, really) have been known to reprice negatively on afternoons like this where we've rallied for most of the day and begin drifting off into the close.
Whatever the case, Fannie 3.5s are back down to 103-09, getting closer to the 103-07 / 103-08 pivot zone. 10's are back into negative territory, up less than a bp at 2.187, but looking like they want to break higher. "Stay frosty" = stay cautious if you need to be. No negative reprice risk yet based on price levels, but the rally is over and the sideways grind is at risk of slipping a bit.
Whatever the case, Fannie 3.5s are back down to 103-09, getting closer to the 103-07 / 103-08 pivot zone. 10's are back into negative territory, up less than a bp at 2.187, but looking like they want to break higher. "Stay frosty" = stay cautious if you need to be. No negative reprice risk yet based on price levels, but the rally is over and the sideways grind is at risk of slipping a bit.
2:28PM :
More Positive Reprices After MBS Break Resistance Zone
The 103-07 to 103-08 zone held up as resistance to multiple attempts to move higher before finally giving way just before 2pm. As we noted, this is a level that has been clearly more likely to cause bounces than allow breaks, and today is no exception (only 1 break vs too many bounces to count). As such, trading activity picked up in MBS shortly after the break and prices followed through into higher territory. Staying in that territory for more than a few minutes has allowed for widespread positive reprices.
The "zone" now serves the opposite role, where it's more likely to act as support vs falling prices. If it's broken again, that would be the cue to lock em up for the day (if you're planning on locking or not otherwise doing so after this batch of reprices).
The "zone" now serves the opposite role, where it's more likely to act as support vs falling prices. If it's broken again, that would be the cue to lock em up for the day (if you're planning on locking or not otherwise doing so after this batch of reprices).
1:05PM :
Reprice Potenital Muted by Resistance as MBS Break Even
Although we do have one report of a positive reprice, MBS will be hard pressed to maintain (or improve to) levels that suggest more of the same. Not only does tomorrow's important data suggest caution among lenders, but price levels themselves are just now getting back to that important pivot zone in Fannie 3.5s (103-07 to 103-08). These price levels have been more likely to result in bounces vs breaks when approached from either direction of late (though breaks obviously CAN happen).
Even if it does happen, we seem to be encountering resistance to the idea so far while 10's similarly struggle with a meaningful break into the 2.17's (stuck at 2.18-ish right now).
There is no significant news or data motivating the return to unchanged levels for bond markets, but the juxtaposition of rising stock prices implies the possibility that we're simply seeing some cash come off the sidelines whereas yesterday afternoon's FT article may have had the opposite effect.
Even if it does happen, we seem to be encountering resistance to the idea so far while 10's similarly struggle with a meaningful break into the 2.17's (stuck at 2.18-ish right now).
There is no significant news or data motivating the return to unchanged levels for bond markets, but the juxtaposition of rising stock prices implies the possibility that we're simply seeing some cash come off the sidelines whereas yesterday afternoon's FT article may have had the opposite effect.
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.
Alberto Lopez : "REPRICE: 2:31 PM - Homeward Residential Better"
Roland Wilcox : "REPRICE: 2:26 PM - USBank Better"
Ethan Brizzi : "REPRICE: 2:26 PM - Plaza Better"
Christopher Stevens : "REPRICE: 2:25 PM - Wells Fargo Better"
Jeff Anderson : "REPRICE: 2:21 PM - Chase Better"
lloyd baeslach : "REPRICE: 2:21 PM - Flagstar Better"
Rob Clark : "Their second."
Rob Clark : "REPRICE: 2:19 PM - Provident Funding Better"
Matthew Graham : "I wouldn't read anything into this afternoon's price action. Check this morning's chart/ranges"
Christopher Stevens : "be interesting to see if the 10YR breaks the same triangle pattern MG posted on the 3.5"
MMNJ : "depends Brent -- won't be an issue for someone making $150K per year -- but a difference of $3,000 per year for a couple making $60K combined is a nailbiter for them"
john murphy : "*somewhat confounded*"
Brent Borcherding : "I do think it does, as it will weed some buyers out."
Christopher Stevens : "I don't consider much of a rally as we are basically back where we closed yesterday"
Brent Borcherding : "MMNJ--I do agree with you, but there is a difference between people whining about it and unwilling to purchase because of it. The initial move upward causes shock, but does it actually prevent purchases?"
MMNJ : "the perfect story 4 yrs ago was home appreciation and unprecedented drops in rates. Now it is going in the opposite direction -- while homes values seem somewhat more stable / appreciating, rates have ticked up. Just a shame"
john murphy : "Is anyone else someehat confuonded by late-day mini-rally ahead of FOMC? Might this portend a stronger-than-anticipated statement in favor of MBS/TSY support? Maybe the traders have gottten ahead of themselves?"
Christopher Stevens : "Hilsenrath will be on CNBC (Kudlow report) at 7pm tonight for anyone interested."
Chris Kopec : "MMNJ....as usual, nobody is asking loan officers for their opinions on that."
Jason Adams : "REPRICE: 2:05 PM - Everbank Better"
Walter Hoskins : "REPRICE: 2:04 PM - Franklin American Better"
MMNJ : "I give up.....http://www.thestreet.com/story/11953831/1/higher-mortgage-rates-wont-hurt-housing-affordability-freddie-mac.html?puc=yahoo&cm_ven=YAHOO"
Craig LaBruno : "Either way I am in complete defense mode for sure. Lock at app and zero floating. Just very unpredictable. But I think we will get relief at some point. But not the relief some people may be looking for"
Andy Pada : "I will guarantee that the Fed does not use the word "taper" in the announcement. If they do, we are done regardless of any qualification."
Bert Swyers : "i think the fed says they will taper if the economic benchmarks are hit, but the key is I think he will say he might increase it if needed, I think that settles this down and we live in the 1.9 to 2.10 range. just my 2 cents"
John Rodgers : "my mind tells me they'd be fools to end this so quickly"
John Rodgers : "My gut tells me the news will be bad."
Bryce Schetselaar : "Which way are you betting, JR?"
John Rodgers : "with a looming fed announcement CS, How much do you have in the bank"
Christopher Stevens : "10YR and 3.5 are right at the close of yesterday. Any bets they close right around there."
Joe Daquino : "That is how it is in Riverside County, California---CL"
Craig LaBruno : "Very strange housing msrket over in Middlesex County, NJ. Plenty of buyers but no inventory. Ton's of rentals too. Ughhh!!!"
Matthew Graham : "RTRS- PENNYMAC MORTGAGE INVESTMENT TRUST-CO THROUGH ITS UNIT PENNYMAC CORP ENTERED INTO AGREEMENT WITH CITIGROUP GLOBAL MARKETS REALTY CORP-SEC FILING "
Matthew Graham : "RTRS- PENNYMAC-AGREED TO BUY FROM CITI CERTAIN NON-PERFORMING RESIDENTIAL MORTGAGE LOANS AND RESIDENTIAL REAL PROPERTY ACQUIRED IN SETTLEMENT OF LOANS "
Matthew Graham : "it's not perfectly monthly, but yes, they only have the full pow wow when policy announcements come out."
Andy Pada : "Do Fed members only meet once a month? Or do they meet several times but only one FOMC announcement per month?"
Rob Clark : "REPRICE: 12:08 PM - Provident Funding Better"
Dio Vannucci : "The funny thing is, steering or not, I have to offer the 2.5% AND match the other lender's rate so the borrower usually ends up with a better deal in the end which is the point of any regulation. I end up doing loans on the cheap many times just to keep the builder happy but it's a win-win-win for all involved. I'm sure the NSA is reading this as I type and now I'll be visited by the CFPB next week."
Dio Vannucci : "The regulator said it wasn't steering because they don't see it as a monetary benefit to the builder because he is only willing to pay 2.5% in CC on any transaction. If the builder ever accepted a deal where he was paying 3% I'm sure someone would say that was a disparate impact.......dang CFPB."
Tim McNerney : "agree, if the end result is the customer is where someone wants to them to be for fear of losing out...seems like steering to me"
Michael Gillani : "But then again there are no constants in this industry anymore. When it comes to compensation, disclosure, fees, licensing etc. it depends on who you work for on weather or not you need to follow that particular law."
Michael Gillani : "Yeah but "steering" doesn't mean require. As an originator, pushing someone to a certain lender or program for any reason is steering and likewise a builder only offering a credit or discount if you use their financing is equally steering in my opinion."
Dio Vannucci : "It works pretty well and we have the arrangment reviewed for compliance with no issues because at no time does the builder require the borrower to use anyone in particular to get the deal."
Dio Vannucci : "I have an agreement with several of the local homebuilders that I guarantee total closing costs and prepaids at 2.5% so when they get an offer from a borrower and ask for 3-4% the builder counters back and says they'll pay the 2.5% and the borrower can cover the remainder or they can use their preferred lender and have their closing costs totally paid for. "
Read what our user's have to say about MBS Live on LinkedIn.
» Start a two week free trial of MBS Live.