MBS MID-DAY: Mortgages Outperform as Treasuries Weigh Auction Needs
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
It's been another "nice" morning for bond markets. Treasuries are holding their ground and MBS are improving incrementally. Both began the day in relatively unchanged territory and both benefited from short-covering right out of the gate (traders who had previously bet on lower prices being forced to cover as prices move higher). This was mostly a factor for Treasuries heading into the 8am hour and only evident on 24 hour charts. Since the mini-snowball of short-covering deposited 10yr yields back in unchanged territory, MBS have been slowly tightening the screws (improving while TSYs held steady). This is partly due to the upcoming Treasury Auctions being a more pressing issue for the Treasury complex (why chase prices higher if they'll soon be bidding on new supply at auction?). It's also the case that MBS simply tend to tighten vs Treasuries any time Treasuries are holding steady during and after high volatility sell-offs. In other words, MBS underperformed significantly over the past few months--especially on Friday--and are now taking the opportunity to recover a bit in terms of spread while the volatility is on hold.
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.
9:09AM :
Flat to Weaker Overnight; Domestic Trading Bringing it Back
For the second morning in a row, Treasuries have made a feint higher in yield heading into the 8am hour only to completely reverse it before the 9am hour. Before that, the overnight session wasn't much to write home about. Yields were moderately higher but traded a tight 2.64-2.67 range in both Asian and European market hours. Domestic traders were covering shorts right out of the gate and we're now down into the 2.63's after the aforementioned "feint."
For their part, MBS started the day just on the tail end of the Treasury head-fake. This allowed 4.0s to open in positive territory and fall only briefly to yesterday's highs. They've since added 4 ticks and are now at 103-05. Fannie 3.5s are up 6 ticks at 100-05.
The only significant scheduled data of the day arrives at 1pm with the 3yr Treasury Auction. The more prominent source of market movement will be the "unseen hands" of tradeflows and technicals, whereby traders are watching what other traders are doing, as well as technical levels for their best guidance.
All this is occurring in the same low volume and relative lack of liquidity that has characterized most of the past two weeks. This sets the stage not only for volatility, but volatility that doesn't necessarily line up with causality that can be easily observed or "blamed" in terms of data or economic events.
For their part, MBS started the day just on the tail end of the Treasury head-fake. This allowed 4.0s to open in positive territory and fall only briefly to yesterday's highs. They've since added 4 ticks and are now at 103-05. Fannie 3.5s are up 6 ticks at 100-05.
The only significant scheduled data of the day arrives at 1pm with the 3yr Treasury Auction. The more prominent source of market movement will be the "unseen hands" of tradeflows and technicals, whereby traders are watching what other traders are doing, as well as technical levels for their best guidance.
All this is occurring in the same low volume and relative lack of liquidity that has characterized most of the past two weeks. This sets the stage not only for volatility, but volatility that doesn't necessarily line up with causality that can be easily observed or "blamed" in terms of data or economic events.
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.
john murphy : "RT sounds like a portfolio loans elf insured as no MI Co willinsure that property"
Jason York : "are they looking for money to make the repairs, or just a loan to buy a property in bad shape?"
Victor Burek : "if tx loan, too big for a 203k"
Tony Cardinal : "i dont know about the capacity of the borrower, but maybe a 203k, which would minimize what they had to put down and could finance the repairs"
Randy Teakell : "OK - my first time to ask a question - been on here a month. I have a former client who wants to buy a 380k foreclosure, wants to put 40-50 down. The property has missing toilets and carpet in poor shape and several other cosmetic issues. Is there any loan product that allows this to be addressed? We are a FNMA direct lender. Thank you for your help. "
Andy Pada : "with a huge grain of salt, the Fed could taper in September by $8.5B; abide by their forecasts but because of the reduced amount won't lead to market sell off that will destroy their balance sheet"
Matthew Graham : "if you already know it actually happened, then naturally, the higher the amount, the worse it is"
Matthew Graham : "Great question, it's hard to separate the effects of "they actually did it!" from the amount."
Andy Pada : "MG, the market/poll seems to believe that the taper will begin in September with a $20B reduction. What if the amount is less? market mover?"
Michael Gillani : "http://www.ijreview.com/2013/07/64069-6-economic-stats-that-will-make-you-wanna-cry//"
Michael Gillani : "Sounds like jobs and the economy are doing great:"
Victor Burek : "you might want to read this, http://mbslive.mortgagenewsdaily.com/knowledgebase/articles/24081-mbs-basics"
Matthew Graham : "The 4.0 FNMA-30 in the live pricing window below"
Brian Keenum : "Could someone help me with what the 4.0 is, I see it but don't know what it is... sorry."
Ken Crute : "4 is where the action is now ct"
Charles Tadros : "any reason 4% is the default coupon when war room is launched?"
Matthew Graham : "yeah, those were the days. Papandreou was the best."
Jeff Anderson : "Seems like Greece just needs to stick its hand out now for its money? Who do they think they are, my wife? Can kicking isn't even a spectator sport lately. Welcome to 2013."
Jeff Anderson : "GM, all. I would think the auctions would go ok with a supply over rally on Thursday at 1:01pm."
John Tassios : "important test at 1:00 auction today, and rest of auctions this week, hopefully they will all be good auctions at these levels and buyers come in to buy"
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