MBS RECAP: Quiet August Trading is Underway
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
Bond markets previously wrestled with the idea of settling down for the summer--something they haven't really been able to do since 2008--but found themselves unable to avoid linking Payrolls outcomes with Fed tapering prospects (where stronger jobs = September tapering and weaker job growth = December or beyond). With the most recent report being moderately constructive for the "December or later" view and with 10yr yields topping out ahead of the report at the same spot they topped out after the last one, we may be looking at several weeks of ambiguity before any concerted movement. Today certainly seems to suggest that and it's the only evidence we have so far. There was almost no reaction to a fairly big beat in the ISM Non-Manufacturing data and volume stayed extremely low. MBS are heading out in the same range they've traded all day (also the same range they traded Friday afternoon, and the same price levels hit within minutes of Friday's jobs report.
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.
3:41PM :
Low Volume, Flat Prices; Quiet Session Continues
After this morning's brief adjustment to slightly lower prices following the ISM Non-Manufacturing Index, prices and yields have simply drifted sideways. 10yr Treasuries held onto the mid 2.65's as something of a ceiling and are currently at 2.642. Fannie 3.5s are down 7 ticks on the day at 100-24 and Fannie 4.0s are down 2 ticks at 103-29. Volume is exceptionally low--right in line with the most of the sessions in July until last Wednesday. The light impact from one of the two most significant reports of the week confirms the pulse-free bond market activity expected this week. There's nothing to do but keep a loose eye on it for any potential unruly behavior. It briefly looked like we might get some this morning, but no.
12:10PM :
Drop In Jobless Rate Puts Fed Closer To Ending Bond Buys: Fisher
(Reuters) - The Federal Reserve is nearer to dialing back its massive bond-buying program after the unemployment rate dropped last month, a top Fed official said on Monday, adding that he wants reductions to start this fall.
The U.S. central bank is buying $85 billion in long-term securities each month in order to keep interest rates low and boost hiring and investment. Fed Chairman Ben Bernanke said in June that the Fed would probably make cuts to the program later this year, with an eye to ending it by mid-2014, when unemployment will likely be around 7 percent.
"Having stated this quite clearly, and with the unemployment rate having come down to 7.4 percent, I would say that the (Fed's policy-setting) committee is now closer to execution mode, pondering the right time to begin reducing its purchases, assuming there is no intervening reversal in economic momentum in coming months," Dallas Federal Reserve Bank President Richard Fisher said in remarks prepared for delivery to the National Association of State Retirement Administrators.
The U.S. central bank is buying $85 billion in long-term securities each month in order to keep interest rates low and boost hiring and investment. Fed Chairman Ben Bernanke said in June that the Fed would probably make cuts to the program later this year, with an eye to ending it by mid-2014, when unemployment will likely be around 7 percent.
"Having stated this quite clearly, and with the unemployment rate having come down to 7.4 percent, I would say that the (Fed's policy-setting) committee is now closer to execution mode, pondering the right time to begin reducing its purchases, assuming there is no intervening reversal in economic momentum in coming months," Dallas Federal Reserve Bank President Richard Fisher said in remarks prepared for delivery to the National Association of State Retirement Administrators.
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.
lhefner : "REPRICE: 3:06 PM - Flagstar Better"
Matthew Graham : "I think Bernanke's transparency campaign + the less-than-boring circumstances of the past 5 years have afforded a richer backdrop against which the Fed govs can perform their scheduled speaking."
Tim Y : "Are fed member always this outspoken in regards to policy? Or is this just under Ben? "
Matthew Graham : "I think you answered all 2-3 of your own questions MG2"
Michael Gillani : "Fischer is a hawk. How would they give credence to the UE rate going to 7.4% when the job participation rate went down? It's directly related and I don't think the Fed is dumb enough to not see that. Fisher has always wanted QE to end fast so he'll say anything towards that agenda."
James Lawrence : "MG, have you seen this?
Fed's Fisher: Closer to taper after job data
http://www.marketwatch.com/story/feds-fisher-closer-to-taper-after-job-data-2013-08-05-1191306"
Matthew Graham : "or http://research.stlouisfed.org/fred2/graph/?id=MPRIME,"
Clayton Sandy : "http://www.fedprimerate.com/wall_street_journal_prime_rate_history.htm"
Jay Rodriguez : "So I must be missing something, but I've been looking for the past 5 minutes for a chart history of the Prime Rate. Anyone have a link handy?"
Jason York : "I believe that since he is taking this 401k distribution pre-tax, it is taken out of his income. So his paystub pay show $1666.67 per month, but also shows a $1666.67 pre-tax contribution to his 401K, which nets him $0 income that month. So he basically has no income that month since all of his money went to his 401k. Look at your paystub and w-2, and it will show the same."
Jon Bodan : "taxable income would be $0 but the W2 should show the $20k."
Tom Bartlett : "I agree CR. W@ should still show the 20k but 1040 should be zero?"
Caroline Roy : "tax question. If a SE borrower who files a 1120S return pays himself $20k in W2 wages/year and then makes a $20k 401k contribution, wouldn't his W2 still show the $20k? i ahve an accountant who amended his w2 to show zero due to the contribution. that doesnt sound right"
Jon Bodan : "I've got a client with great scores, reserves, but a lot of income that can't be documented, really. I know DU is not going to work, but I haven't had luck getting LP to take these in the past. If you do get the unicorn findings on LP, what kind of back ratio will it accept?"
rford : "Regional VA Office says it is black and white and unfortunately since he did not serve 6 years they cannot do anything"
Curt Sandfort : "probably need to send it in to VA with supporting documentation to get the COE"
rford : "I have a Veteran that served 5 years, and 8 1/2 months in the National Guard, and was offered an "early out" option due to his unit shutting down. VA says he is not eligible even though the DOD says he served his full 6+2 service contract. Anyone ran into this before and helped a Vet get his eligibility? "
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