MBS MID-DAY: Yesterday's Gains Erased Ahead of Fed
By:
Matthew Graham
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MBS Live: MBS Morning Market Summary
Please note the timestamp on the pricing snapshot below (and that this mid-day recap will typically be delayed on higher volatility mornings as I'm primarily focused on writing alerts for MBS Live members and answering real-time questions from the community on the Dashboard). MBS continued moving lower into the noon hour and now looks to have bottomed out--at least temporarily--at 103-03 in Fannie 3.5s. We've seen quite a few negative reprices and have already issued two alerts (the second one does not appear in the list below). The gist of that alert at 8:26am was that levels had deteriorated to the point that reprices were more likely, and despite that fact, the market movement was not indicative of any major thematic shift ahead of the Fed. Is/was there negative reprice risk? Definitely. Did it have anything to do with front-running the Fed, leaks, or any other big-picture, game-changing consideration? Not remotely. All eyes are on the Fed at 2 and 2:30pm Eastern. If you missed this morning's piece, it's worth a read if you can find the time. READ: The Day Ahead: Fed's Script Already Out. Will They Stick to it?
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.
11:06AM : ALERT ISSUED: Slightly Increased Reprice Risk as MBS Break Lows
It will probably be a bit soon for most lenders and we probably haven't seen sufficient losses, but MBS are edging into a range where negative reprice risk first becomes conceivable. Lenders who priced at the highs would have had 3.5s around 103-12. Given that we're now at 103-07+, the 4.5 ticks is just over the eighth of a point that usually brings about the amber alert. Making things slightly more austere is the fact that 10's have also broken above their overnight highs and are now up to 2.196 after holding under 2.19 previously.
9:26AM : Bond Markets Holding Moderate Gains. Calm, Sideways Morning
Treasuries were stone silent during Asian hours, holding inside an impressively narrow half bp range (2.185-2.19) despite a 200pt swing in the Nikkei and moderate movement elsewhere. Granted a 200pt sell-off and rally in the Nikkei is just another day at the office for Japanese stock markets, but if you needed any reassurance that US Bond Markets are marching to the beat of their own drum, there's another nugget.
With the onset of the European session, Treasuries did give a small amount of chase to German Bund movements on the heels of a strong auction, but all told, global markets watch and take direction from the US, not the other way around. As such, global markets are generally subdued as we wait for this afternoon's FOMC events (starting at 2pm Eastern).
10's managed to eke out a bp and a half of improvement, currently bouncing along 2.167 (2.173 currently) and Fannie 3.5s are grinding super sideways at 103-12. Equities are in line with yesterday's latest levels after modest overnight volatility (7 point range, give or take, for S&P's). There's no significant data this morning, and all eye are on the Fed this afternoon.
With the onset of the European session, Treasuries did give a small amount of chase to German Bund movements on the heels of a strong auction, but all told, global markets watch and take direction from the US, not the other way around. As such, global markets are generally subdued as we wait for this afternoon's FOMC events (starting at 2pm Eastern).
10's managed to eke out a bp and a half of improvement, currently bouncing along 2.167 (2.173 currently) and Fannie 3.5s are grinding super sideways at 103-12. Equities are in line with yesterday's latest levels after modest overnight volatility (7 point range, give or take, for S&P's). There's no significant data this morning, and all eye are on the Fed this afternoon.
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.
Ross Miller : "I have sent the actual w-2. How are we supposed to provide this even the 4506-t states it won't be available until next year?"
Jason York : "Ross, my UW's are wanting 2012, but if you get a no hit, and can show them, then they will take 2011"
Steve Chizmadia : "I have had to furnish validated w2's in situations in which 2012 income is being used and the 2012 returns are not yet filed or are on extension"
Matthew Graham : "OB can't get access to MBS prices any faster than you can if you're here. Bottom line."
Michael Ullmann : "Ok fair enough, not sure how it works for other guys on OB but my pricing fluctuates by the minute."
Ross Miller : "Has anyone run into lenders requesting verifications of 2012 w-2's? This is an FHA loan the borrower is a CPA owns his own business and gets paid with w-2's and partnership income. He has filed an extension for 2012 and the lender is asking for 2012 w-2 verification?"
Andy Pada : "I, along with almost everyone on CNBC, have been conflating asset purchase and FFF. It has almost become conventional wisdom that the two have a penumbral relation. Regardless, taking into account Hilsenrath's role/position, I do not necessarily agree there is zero mitigating effect in the recent article."
Matthew Graham : "If things go bad for MBS, this will be the first place you'll know, short of subscribing elsewhere"
Michael Ullmann : "Meaning I will be on this forum like a hawk but if things go bad at 2 or 2:30 my pricing is live and will adjust regardless of if I get a warning from you "
Michael Ullmann : "Quick question MG, for those of us using Optimal blue with live pricing. Am I at a disadvantage vs the LOs on here that see your update and beat wells, etc to the punch before a neg reprice "
Rob Ellis : "Don't know about everyone else but I hedged on the side of expecting green today...little risky but feeling confident - we shall see."
Andrew Benson : "Okay I'm calling it: There will be no tapering in 2013, regardless of what the statement and Q&A are today."
Andrew Horowitz : "excellent work MG"
Ira Selwin : "yes MG - good stuff"
AQ : "must read: http://www.mortgagenewsdaily.com/mortgage_rates/blog/313313.aspx"
AQ : "gm MBS Live. Really nice recap of Bernanke comments in Day Ahead MG. "
Jason York : "interestly, I've recently received several new requests, seems a lot of people wait until they see that rates are starting to go up, and then jump in, kind of a bit late"
FPH : "Ira, regarding new applicationsove the past 3 weeks ... about 1 refi for every 4 purchase... The refis have been people that have told me they were simply waiting to see how low rates could go and now see urgency to refinance before it is too late."
Ken Crute : "30-35 purchase 70-65 refi depends on the month "
Jason Harris : "80 purchase 20 refi"
Brent Borcherding : "Honestly, 50/50"
Roger Moore : "20/80"
Ira Selwin : "Question for anyone willing to answer. What are you seeing your Purch/Refi split at this time?"
John Tassios : "MG / has one heck of a post from midnight last night though / I enjoyed reading it and it laid it out pretty well.....glad that coffee drinkin....is working good for him !!"
Matthew Graham : "Here's Kuroda's hilariously diplomatic skirting of the tapering issue: RTRS- BOJ GOV KURODA SAYS FINANCIAL MARKETS HAVE BEEN SOMEWHAT UNSTABLE SINCE LATE-MAY MAINLY DUE TO OVERSEAS FACTORS "
Matthew Graham : "re "charts," here's the about-face in Yen and Nikkei on 5/22 in context. It's put a tremendous kink in their plans. http://screencast.com/t/YPHRAFdD"
Matthew Graham : "Kuroda just spoke... confirmed Japan freaked out about US ever since Bernanke-san made with the taper talk on 5/22. Charts confirm same. No surprises"
Matthew Graham : "he may be speaking at G8. I just don't have anything on calendar"
John Tassios : "OK, thought Abe was to speak at G-8 tomorrow and possibly give insights on his policies / Maybe I need to quit drinking coffee"
Matthew Graham : "Japan is freaked about US, not the other way around."
Matthew Graham : "It does nothing to make anything any different than it was. The guy is in the seat until January. He has more power to calm or inflame between tomorrow and then, than he can possibly hope to wield. Yellen is odds-on fave to replace, and widely held to be in line with Bernanke. There is no story here with the Obama thing"
John Tassios : "no maven or talking head, just me being worried about the Bond Market in general for more volatility with this lame duck label being made official like that on the eve of this meeting / plus now, you have to wonder the FMOC committee Hawks will be more vocal than ever at this meeting / It does not help Bernanke's case for calming the markets down tomorrow / if anything, makes his job that much harder"
Matthew Graham : "The nice thing about the notion that Bernanke's efficacy was somehow lessened by Obama is that it's a quick way to judge the credibility of anyone who suggests it as a relevant consideration. You can save so much time wondering if any given talking head and/or maven is worth your time listening to by simply being able to tune out absolutely everything they ever say again if they tell you Bernanke doesn't matter."
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