MBS RECAP: Very Calm and Moderately Positive
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
In the context of the past few weeks and months, something feels wrong about today. Nothing is actually wrong (or actually "anything" considering the abysmal trading volumes on the vacation-heavy week), but the volatility was about as quiet as we've seen in that time, and on a day where MBS rallied in linear, logical fashion following weak employment components in the PMI data. The rally wasn't much to write home about relative to Friday's latest levels, but compared to the day's lows at 101-06 in Fannie 3.5s, the trek to 101-20 (just over three eighths of a point) is nothing to shake a stick at. Additionally, today's price action fits in tidily with the prevailing trends toward ever-so-slightly higher prices and narrower trading ranges with seeming disregard for the fact that Friday was "month-end." While month-end trading DID cause intraday volatility, it apparently was not juicing or restraining prices--at least not as far as today's light volume can tell us. Email auto-responders and sneaking suspicions suggest tomorrow might pick up, but not as much as Tuesday normally would after a slow Monday.
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.
3:03PM :
Some Weakness After Good Run Through 2pm
Although some lenders who have not yet repriced positively may still do so, other lenders who do their best to keep the closest pace with changing MBS prices may soon be considering negative reprices. As has been increasingly the case during the last 2 months of selling, post-2pm has been a genuine problem for bond markets. Today is no exception as MBS put in their highs of the day right at 2pm and have been sliding since then.
The weakness is only moderate at the moment, leaving MBS in positive territory by an eighth, but we're just over an eighth off previous high. Combine that with the potential shift in today's short term trend and we'd say risks are looming, though not yet at "alert" levels. If Fannie 3.5s continued lower to, say, 101-16, risks would be more developed, and are merely outside possibilities for one or two lenders at the moment.
Fannie 3.5s are currently up 5 on the day at 101-18+ and 10yr yields are near unchanged at 2.491. We'll either see the selling trend continue or the 3pm Treasury close will stand out as a near-term focal point for volatility and we'll get back to the regularly scheduled programming (with solid improvements on the day against the backdrop of relatively unchanged Treasury yields). We'll let you know if the selling trend continues.
The weakness is only moderate at the moment, leaving MBS in positive territory by an eighth, but we're just over an eighth off previous high. Combine that with the potential shift in today's short term trend and we'd say risks are looming, though not yet at "alert" levels. If Fannie 3.5s continued lower to, say, 101-16, risks would be more developed, and are merely outside possibilities for one or two lenders at the moment.
Fannie 3.5s are currently up 5 on the day at 101-18+ and 10yr yields are near unchanged at 2.491. We'll either see the selling trend continue or the 3pm Treasury close will stand out as a near-term focal point for volatility and we'll get back to the regularly scheduled programming (with solid improvements on the day against the backdrop of relatively unchanged Treasury yields). We'll let you know if the selling trend continues.
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.
Jason York : "REPRICE: 2:49 PM - Fifth Third Mortgage Better"
Joe Moran : "REPRICE: 2:38 PM - Chase Better"
Steve Chizmadia : "REPRICE: 2:28 PM - Sun West Mortgage Better"
Bryce Schetselaar : "way off"
Joe Daquino : "I just priced out a High Balance at 78% LTV with a 792 score @ 5.5% with no points........does that sound right or is my pricing off?? "
Nate Miller : "REPRICE: 2:24 PM - Caliber Funding Better"
Joe Daquino : "IMO, it makes it easier for us to get licensed in multiple states. Only issue I have is paying for renewals and CE every year and that becomes a daunting task if you have 10 or more states under your belt."
Joe Daquino : "Because, some states (like the important ones in my book) don't accept the UST right now."
John Paul Mulchay : "I get that, but why do state tests even exist now that they are creating a blanket test. For example, if 30 states are on board, are you actually tested on the state-specific laws for all of them? I think not."
Joe Daquino : "The UST satisfies the state testing requirements for each state that accepts the UST. All you have to do is apply and pay for licensing in each state that accepts the UST once you have passed. "
Joe Daquino : "So you don't have to take all the individual state tests."
John Paul Mulchay : "Anyone explain the need for a Uniform State Mortgage Test when the National one pretty much covers it?"
Jason Anker : "Jeff - no it's not"
Jeff Weaver : "Is making a charitable contribution to realtors fav charity a respa violation?"
Jason Adams : "REPRICE: 2:00 PM - Flagstar Better"
Jason Anker : "Ross we use Genworth"
Ross Miller : "Please recommend reverse mortgage lenders that you all have had success with. I haven't done any but I am getting some calls. Thanks, "
Matthew Graham : "bond traders still playing battleship, but Fed was rising tide that lifted all boats. That do it?"
Matthew Graham : "If it was a simple matter of "- new originations + Fed MBS buying" where any number greater than zero = #winning, then of course, we'd be winning. I guess what I'm saying is that the price pressures exist independently from Fed Buying. Fed Buying certainly raised the bar for all prices, but the same ebbs and flows still occur at that higher price level. They still occur now as "the bar" is being lowered in these bumpy movements."
Matthew Graham : "SJM, the Fed is only buying the lion's share of new originations. This instantly raised prices back in Q412, but all the while there's not only been a 'sparkle and fade' effect with respect to QE3, but also the vast non-production market in MBS that does most to dictate the day to day price movements."
S John Murray : "HI MG ...I have been wondering the same thing..I remember, back in that CNBC interview on 5/20 when FIsher said it was time to start reefing in the sails becuase at the current pace the Fed would be purchasing 100% of MBS market...so who, exactly, is selling so much of the MBS that even the Fed purchases could not keep a lid on those MBS prices climbing out of control like a flock of wild turkey's "
Matthew Graham : "@CB, my thought is that the Fed is likely to be an ongoing guardian of liquidity in mortgage markets. They've been 100% likely to step in any time things started getting out of line with spreads since 2008. I'd also say that their measure of widening spreads would not only be based on a historical scale (as opposed to the gap from recent levels in late 2012), but that they'd likely be willing to let it push a bit higher/wider to whatever extent they're concerned about an overheating housing ma"
Jason Anker : "Trust Income
The following table provides verification requirements for trust income.
Verification of Trust Income
Confirm the trust income by obtaining a copy of the trust agreement or the trustee’s statement confirming the amount, frequency, and duration of payments.
Verify that the trust income will continue for at least three years from the date of the mortgage application.
Unless this income is received monthly, documentation of current receipt of the income is not required to comply "
Jason York : "CR, i would think that you would have to show 12 months of receipt or tax returns showing the disbursments, and then be able to show the 3 year continuance"
Cory Bannerman : "@MG in regards to the tapering... I agree that it has already been "priced in", however my concern is that once we loose a buyer of 85B per month we will have liquidity issues similar to the last couple weeks where the spread between BID and ASK becomes enormous... do you have any thoughts MG?"
Caroline Roy : "anyone have a link to how many months you need to be receiving trust income to count it? i thought it was three..."
Al Bordessa : "REPRICE: 1:40 PM - Stearns Lending Better"
Matthew Graham : "@Tom, I was sort of hoping for this to help us earlier in the year, and although it may have helped a bit, it didn't turn out to be nearly as potent as I would have like it to have been."
Tom Sawyer : "MG. Santelli mention that the spread between the German 10 yr. and our 10 yr. were the widest in quite some time. Could this help us as we come back more in line with the previous range?"
Matthew Graham : "Not seeing much of a bump. Looks more like MBS outperformance in an otherwise generally flat market."
Andy Pada : "MG, what is today's bump all about? the internal employment data of ISM and Markit?"
Matthew Graham : "type the word "coupon" into the search box on this page to see every knowledge base entry with any reference to "coupon." http://mbslive.mortgagenewsdaily.com/knowledgebase/topics/4039-faqs"
Ken Crute : "brian at the top right hand side of this site, click on LEARN, its a MBS boot camp with tons of information "
Brian Hyvare : "Where can I learn more about the different coupons?"
Matthew Graham : "As always, you will know about any moves up in coupon before I would, based on the composition of your pipeline. If you're mostly in the 4.375+ range, then you've moved up into 4.0 coupon territory. As far as volume, there's been a good mix of 3.5s and 4.0s"
Frank Guirguis : "REPRICE: 1:03 PM - Provident Funding Better"
Patrick McCarroll : "MG, is most volume still in the 3.5 coupon? Any move up in coupon?"
Matthew Graham : "REPRICE: 12:48 PM - Plaza Better"
Jason Anker : "yes I have"
Joe Daquino : "Has anyone else noticed that Redwood pricing is just terrible lately???"
Caroline Roy : "i was able to price a jumbo better than Wells retailearlier this year, but the customer rather stupidly went with an IO ARM that was only .125% lower than my fixed rate program. Bad move in my opinion since they wanted to stay in the house for quite some time. "
Thysy Trinh : "yeah it seems like the only way i can compete is to be full correspondent with the big banks"
Jason Anker : "chase, wells and citizens seem to be making a big push in that direction"
Ken Crute : "the big retail banks can't be touched on Jumbo loans, they want those clients thru their Private Banking channels "
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