MBS RECAP: Yesterday's Losses Recovered; FOMC Minutes and Data Ahead

By: Matthew Graham • Tue, Aug 20 2013, 5:26 PM

MBS Live: MBS Afternoon Market Summary

Bond markets had a tremendously strong overnight session with solid gains and big volume. Whether this had anything to do with the actual events of the overnight session (some suggestions of emerging market turmoil and/or Asian Forex losses helping Treasury yields lower) or whether the overnight session was a more simple correction after reaching new 2+year highs in 10yr yields doesn't much matter.

It could have mattered more if today's rally had been bigger, but as it stands, today's best levels were in line with the worst levels from last Thursday's big sell-off. That leaves us teetering on the edge of just another stair-step in the longer-term trend toward higher rates. This week's trading has been and likely will continue to be insignificant and inconsequential compared to the next two weeks, ESPECIALLY that which follows the jobs report on Sept 6th.

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
94-31 : +0-21

FNMA 3.5
99-04 : +0-19

FNMA 4.0
102-18 : +0-15

FNMA 4.5
105-03 : +0-10

GNMA 3.0
95-26 : +0-23

GNMA 3.5
100-04 : +0-19

GNMA 4.0
103-11 : +0-17

GNMA 4.5
105-22 : +0-10

FHLMC 3.0
94-21 : +0-22

FHLMC 3.5
98-27 : +0-18

FHLMC 4.0
102-12 : +0-15

FHLMC 4.5
104-19 : +0-10

Pricing as of 4:02 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.

2:52PM : MBS Well Off Previous Lows; Sideways and Sleepy

Fannie 4.0s haven't really budged since recovering from their earlier weakness into the the PM hours. They're currently up 12 ticks on the day at 102-15, just 1 tick off the highs of the day. Treasuries are providing a supportive backdrop with 10's continuing to move away from the 2.84 support level, now down to 2.82. Things are exceptionally quiet given the exceptionally high level of overnight activity. Negative reprice risk is absent. Lenders don't have much incentive for positive reprices either, but a "stability reprice" isn't entirely out of the question. Either way, we're tilted more positively than negatively now, and that's been true for over an hour now.

1:04PM : Heads Up: Testing Weaker Levels (But Holding So Far)

We're in that magical in-between territory for MBS movement where positive and negative points of view are perfectly deadlocked. For now, the MBS are 4 ticks lower from their previous highs BUT only 2 ticks lower than rate sheet print time levels. 10yr yields have approached their weaker levels of the day but continue to find support before breaking above 2.84. On a final note, some of the weakness in Fannie 4.0s is being redirected to Fannie 3.5s as buying demand.

All the above having been said, this is simply a heads-up that MBS and Treasuries are "hanging out" at their weaker levels of the day, and while reprice risk can't ever be ruled out altogether, we're not seeing anything to suggest it currently.

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.

Tom Schwab : "REPRICE: 3:24 PM - Franklin American Better"

Jason York : "depends on what type of loan, I think FHA says that if it is a significant payment, then you can't ommit it"

Dustin McAlister : "installment agreement on IRS taxes owed, if there is less than 10 payments owed can you omit? anyone know for sure?"

Matthew Graham : "Not that have been aggregated and averaged AM"

Ted Rood : "could be both crazy and someone predicted 1.5%, AR, perhaps you can share a room at the pysch ward."

Amitab Mukerjee : "have payroll predictions been released yet?"

Matthew Graham : "though I think we'd need to go under 100k, probably, to even begin talking about 2.2"

Matthew Graham : "material weakening of the big economic metrics. Average payrolls heading under 150k and staying there, etc."

Andrew Russell : "MG, what would it take for us to initiate the long march down to 2.2, which I think is where Pimco said we are headed by the next quarter"

Matthew Graham : "Overnight lows at 2.805 AR. Looks like we weren't keen on breaking that at 11:20, so until we get lower than 2.812, nothing much to be excited about. Could even be consolidating into FOMC Minutes at this point, albeit with a potential course correction from AM Econ data."

BVG : "anything lower"

Andrew Russell : "BVG, after 2.82 where is our next point to break downward to excite us?"

Matt Hodges : "wow; no one is repricing... you should hold them to that promise, CHip"

Chip Harris : "Have a builder's preferred lender that I am competing against at 4.5% with $5500 origination now, and tellign the borrower they shoudl be at 4.375% with no origination by the end of the days because MBS are up."

Alex Gonzalez : "just change the word "reverse mortgage" to "World Savings Option ARM" and this same argument has been going on for decades."

Victor Burek : "I've never sold a reverse mortgage, but i am open to the idea that a product is not for everyone, but it is right for some"

Matt Hodges : "i don't sell the product, but i appreciate it's ability to assist"

Andrew Russell : "MU, you aren't ignorant. Debate is the essence of life. "

Michael Ullmann : "This sounds like a political debate, I have one view and you have another. Rather then leave it at that you will chalk up my opinion to ignorance. And I will chalk up your opinion to the fact that you sell the product and make a living off of it. This conversation will go no where, tomorrow I can find a life insurance sales men and fight with him about why whole life is pointless and overprice and he will then call me ignorant."

Victor Burek : "yes charles"

Charles Tadros : "does fha allow Non- occupying Co borrowers?"

Steven Stone : "yeah that's a great question...I was wondering the same thing"

Clayton Sandy : "Has anyone heard whether the current USDA Boundaries will be extended. I know they extended them once, but I thought the end of September was the deadline. Utah is set to lose some pretty big areas."

Amitab Mukerjee : "precisely for the reasons you say. Reduced hourly wages and burger-flipping jobs as the driver of any positivity in empoyment numbers"

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