MBS RECAP: Coasting Out Near Best Levels; Uneventful Post-Auction

By: Matthew Graham
MBS Live: MBS Afternoon Market Summary
Today's 30yr Bond Auction managed to create a few small spikes higher and lower in rates this afternoon before the long end of the yield curve settled right down and drifted sideways.  30yr yields generally bounced on a ceiling created by yesterday's floor, as did 10yr yields.  This was once of the flattest days of the year for MBS with 9 out of 10 quotes/trades falling inside a 101-02 to 101-05 range in Fannie 3.5s.  Fannie 4.0s were centered on 104-06 in nearly as narrow a range.  We'll lose around 9 ticks tonight after the roll, which would currently leave Fannie 3.5s around 100-28 and 4.0s around 103-30.  There's limited data on tap tomorrow and Monday with Tuesday bringing Retail Sales and the week will be slightly busier than this one after that.  Between now and Tuesday, it's anyone's guess.  Tomorrow feels like one of those news-less-but-still-potentially-volatile kind of Fridays.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
97-04 : +0-02
FNMA 3.5
101-04 : +0-06
FNMA 4.0
104-06 : +0-05
FNMA 4.5
106-14 : +0-07
GNMA 3.0
98-09 : +0-05
GNMA 3.5
102-06 : +0-05
GNMA 4.0
104-26 : +0-05
GNMA 4.5
106-20 : +0-03
FHLMC 3.0
96-25 : +0-03
FHLMC 3.5
100-26 : +0-06
FHLMC 4.0
103-31 : +0-05
FHLMC 4.5
105-28 : +0-04
Pricing as of 4:05 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.

1:59PM  :  After Holding Ground, Pressure Remains For MBS
Post-30yr Auction, bond markets had been trading fairly uneventfully (and for almost all intents and purposes, still are), but Treasuries have just edged out of their consolidating ranges. These ranges stood a chance to make for an uneventful afternoon, but as they're broken, the pressure remains for MBS, keeping reprice risk in a sort of "maybe" equivocal territory.

These moves by no means suggest a majority of lenders would reprice negatively, but they raise a shadow of a doubt for a few lenders. We're just now witnessing the first few ticks of this phenomenon, so Treasury yields (which are more important to watch today due to roll-related illiquidity in MBS) would have to stay here or move higher for the risks to remain. Otherwise, this will end up being a slightly oversized test of uneventful late-day consolidation patterns.
1:13PM  :  Some Volatility Surrounding Auction; Still Playing Out; Some Risk
This is not necessarily a negative reprice alert. Prices are currently no lower than they were just before the auction results, but they had drifted slightly lower heading into the auction. As for the auction itself, it was very weak with respect to the bid-to-cover metric, but as we suggested, this is an ongoing theme in the Treasury auctions since May. Markets seem to be taking it in stride fairly well. The yield award was a full bp higher than the 1pm when-issued yield. This isn't that big of a miss for a 30yr Auction, but it does suggest some weakness for the longer end of the yield curve.

Front month MBS are mostly done trading for their life cycle (which ends this afternoon) making for trades that are few and far between. Both Treasuries and MBS look as if they're still in the process of figuring out what they're going to do with these auction results. We have seen the expected weakness, but not much.

10's are not even half a bp higher than pre-auction levels at the moment and MBS are still at pre-auction levels. It's an outside possibility that one or two lenders would be spooked enough by the results combined with the slight weakness leading up to them, to be considering a negative reprice, but that's less likely than simply seeing no reprices (at least not due to MBS price movements... Lender reprice behavior is less predictable around monthly settlement time).

Fannie 3.5s are up 5 ticks on the day at 101-02 and 4.0s are up 3 ticks at 104-03.
11:32AM  :  ALERT ISSUED: MBS follow Treasuries to Best Level of the Day.
The FNMA 4.0 just hit 104-09 while the 3.5 hit 101-08. Lenders that issued rate sheets prior to 9am might be in a position to reprice better if gains hold.
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 Nugent  :  "REPRICE: 2:51 PM - Chase Better"
Victor Burek  :  "Santelli gave it a D"
Matthew Graham  :  "That might get a "D" from Santelli. It's more of a C."
Victor Burek  :  "another low btc"
Matthew Graham  :  "RTRS- US TREASURY - PRIMARY DEALERS TAKE $6.83 BLN OF 30-YEAR BONDS SALE, INDIRECT $6.42 BLN "
Matthew Graham  :  "RTRS- U.S. 30-year bond BID-TO-COVER RATIO 2.11, NON-COMP BIDS $11.90 MLN "
Matthew Graham  :  "RTRS - U.S. SELLS $16 BLN 30-YEAR BONDS AT HIGH YIELD 3.652 PCT, AWARDS 85.26 PCT OF BIDS AT HIGH "
Matthew Graham  :  "3.639 WI"
Jason York  :  "no"
Victor Burek  :  "on a fha loan, they require 3 years from a foreclosure, but only 2 if extenuating circumstances...is a divorce considered extenuating circumstance?"
Dustin McAlister  :  "Unless it is like a guest home or accessory unit, the home is in CA and that seems to be something I have see a few times before"
Dustin McAlister  :  "When the voicemail tells me most lenders don't want to touch it that tells me it is probably not worth wasting time on since we ae a correspondant lender. She need a port product is my guess. "
Jason Anker  :  "CM IMO thats a decline"
Ted Rood  :  "sure there are comps for that.....have done similar, but years ago when dinosaurs roamed the earth."
Matt Hodges  :  "challenge there is finding comps that are detached"
Dustin McAlister  :  "Can anyone refinance 2 homes that are on 1 parcel? "

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