MBS RECAP: Strong All Day Following Weak Data, Light Supply, and Geopolitical Risk
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
This morning's weaker-than-expected Durable Goods numbers started the day off positively for MBS and Treasuries. MBS especially were solid all day long--never moving much from their initial post-data highs. This despite some fluctuations in Treasuries. The most likely suspect behind MBS outperformance is simple function of supply, or rather, lack of supply. In other words, the recent rise in rates hasn't been conducive to new MBS originations, and a level amount of demand for a decreasing supply has helped MBS vs Treasuries. Geopolitical risk helped Treasuries in the afternoon after Kerry's Syria speech, but it was primarily felt in an equities sell-off. The net effect was that Treasuries came back in line with the morning's range and MBS went out at the highs.
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.
1:50PM :
Treasuries Weaker; MBS Holding Ground but Leveling Off
To discuss today's bond market activity as something that moves higher or lower in price or volume is a bit of stretch. But with a big enough microscope, we can see Treasuries start drifting higher in yield into the PM hours.
For the most part, MBS have not followed this move, but they have leveled off after a very slow, very steady somnambulation from 103-02 at 10am to 103-06 at 12:30pm. Fannie 4.0s are currently back to 103-03 and look to be holding there as Treasuries look to be shying away from a more convicted move higher in yield.
There's no negative reprice risk associated with this move. We just wanted to let you know about the relative increase in activity. If anything, reprice risk remains in positive territory as MBS continue to hold ground and outperform.
For the most part, MBS have not followed this move, but they have leveled off after a very slow, very steady somnambulation from 103-02 at 10am to 103-06 at 12:30pm. Fannie 4.0s are currently back to 103-03 and look to be holding there as Treasuries look to be shying away from a more convicted move higher in yield.
There's no negative reprice risk associated with this move. We just wanted to let you know about the relative increase in activity. If anything, reprice risk remains in positive territory as MBS continue to hold ground and outperform.
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.
Clayton Sandy : "Not a rumor, Jason. Fannie confirmed it in their release"
Jason Harris : "I had heard rumblings but now word on the street is no more 97% DU after 11-16 release...if confirmed that will be a pretty big change"
Victor Burek : "i say they continue to downtrend..summer is over, rates higher"
John McClellan : "our application volume (purchase) is down about 12% in last 2 weeks. (we are a 90% purchase shop - even last year) I am thinking it is because of School starting and vacation time in August- i am predicting that apps increase after Labor day...thoughts.....??"
Ted Rood : "Plus they have to be lefthanded, so that knocks quite a few folks out."
Derek Nadvornick : "They also must complete HUD approved counseling at least 30 days PRIOR to application as well. Lots of hurdles and hand holding. But I'm sure it looks good in the press. HUD is paving the way to homeownership again!"
John Tassios : "If FHA wants to help borrowers and bring in more 1st time homebuyers, they should reduce their MIP fees and go back to MIP drop off of 78% LTV"
Derek Nadvornick : "I see it helping more Ch. 7 folks than SS or FC. Ch.7 more result of a job loss than a SS or FC."
Jeff Anderson : "Right, DN. They won't feel too strategic if they're looking to buy again."
Derek Nadvornick : "Those that walked away for other reasons (strategic default) will not meet the guidelines."
Matthew Graham : "http://www.mortgagenewsdaily.com/08192013_back_to_work.asp for the article or http://portal.hud.gov/huddoc/13-26ml.pdf for the mortgagee letter"
Aaron Denton : "Anyone have a link for the new BK/Foreclosure guidelines for FHA that allows for new financing less than the 3 year window?"
Ben Biscoe : "REPRICE: 2:01 PM - Wells Fargo Better"
Rob Clark : "REPRICE: 1:50 PM - Provident Funding Better"
Christopher Stevens : "REPRICE: 1:14 PM - M&T Bank Better"
Jason Harris : "Getting this right (Fed removal from QE) will be much trickier than just a few months of reductions to zero in my opinion....doing it wrong could actually be deflationary in my view and then we start back over.....this mess took a decade to make....exit startegy for both QE and ZIRP will take another 3-5 years minimum from here....gonna have to be REAL gradual when you have a global economy as intertwined as ours"
Jason Harris : "Current housing market could not sustain 6.5%....no question about that...."
Jason Anker : "take Taper out of the question for a sec. Does anyone think we can have strong GDP numbers with rates 5.5-6.5. I dont think house prices could take it."
John Tassios : "I will add to MG2's last comment, if FED QE Tapers this fall, then stocks will sell off, more risk fro deflation with less liquidity in th system, and more of a economy slowdown, thus a broad bond rally this fall into early next year. I predict 2.25 10 yr by thanksgiving, and possibly 1.80 10 yr TSY by Q1 2014, just my opinion on this and not that of MBS Live !!"
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