MBS RECAP: Holding Gains on Slow Afternoon
By:
Matthew Graham
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MBS Live: MBS Afternoon Market Summary
Essentially, nothing has changed since the mid day commentary. The intro section there is the best recap of why today happened the way it did. Here's the link to that, but for everyone else, here's the same story with new words:
It's the last week of summer. The week's leading into Labor Day weekend are always slower for markets in terms of volume and staffing levels, making for an environment where the trading decisions (or programs) of "the few" affect prices for everyone. Sitting in the office watching MBS Live, the prices updating on the screen will look the same as any other time of year, but on day's like today, they're much more "incidental." Add or remove one of the larger trades today and everything could have been different.
Even if that was the case, there would still be little effect on the bigger picture. We're stuck in a range, and trading levels did nothing to threaten that range on either side. Trading levels will remain just as easy to push around tomorrow and within the confines of the recent range (say, last 2 weeks or so), will be very easy to push from one side to the other, and back again. Whatever happens has next to no lasting effect by the time next week's NFP rolls around, but can certainly affect rate sheets in the meantime.
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.
1:18PM :
Moderately Weak 7yr Auction, But Bonds Rally Anyway
The 7yr Treasury Auction was lackluster, with the lowest demand since May 2009 (bid-to-cover 2.43 vs 2.54 last time). The yield award was 0.003% higher than expected which is a relatively small miss (last big miss was 0.008% in March, but it was as high as 0.021% last summer).
That said, the street was expecting the auction to be challenging and it was apparently "not bad enough" to motivate any additional weakness. In fact, bond markets have improved since 1pm with 10's now down to 2.754 and Fannie 4.0s up 4 ticks on the day at 103-09.
Positive reprice risk was already on the table heading into the auction, so this not only remains true, but becomes more so for lenders who weren't necessarily in a position to consider it before (due to later rate sheet print times). In other words, there's now enough of a gap even from those later rate sheets to justify a positive reprice.
That said, the street was expecting the auction to be challenging and it was apparently "not bad enough" to motivate any additional weakness. In fact, bond markets have improved since 1pm with 10's now down to 2.754 and Fannie 4.0s up 4 ticks on the day at 103-09.
Positive reprice risk was already on the table heading into the auction, so this not only remains true, but becomes more so for lenders who weren't necessarily in a position to consider it before (due to later rate sheet print times). In other words, there's now enough of a gap even from those later rate sheets to justify a positive reprice.
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.
Matthew Graham : "RTRS- BID-TO-COVER RATIO AT LATEST SEVEN-YEAR TREASURIES AUCTION LOWEST SINCE MAY 2009 "
Matthew Graham : "RTRS- YIELD ON LATEST SEVEN-YEAR TREASURIES SUPPLY HIGHEST SINCE JULY 2011 "
Matthew Graham : "RTRS - US TREASURY - PRIMARY DEALERS TAKE $10.66 BLN OF 7-YEAR NOTES SALE, INDIRECT $11.82 BLN "
Matthew Graham : "RTRS- U.S. 7-YEAR NOTES BID-TO-COVER RATIO 2.43, NON-COMP BIDS $19.65 MLN "
Matthew Graham : "RTRS - U.S. SELLS $29 BLN 7-YEAR NOTES AT HIGH YIELD 2.221 PCT, AWARDS 55.56 PCT OF BIDS AT HIGH "
John Tassios : "MG,any details on the 7 yr auction?"
Matt Hodges : "u/w can only analyze lower income IF veteran has been given notice of being called up"
Jason Harris : "Borrower is active duty veteran....but is currently in NG with just under one year left....not using any military income to qualify....but there is that question about is your income subject to change if you are called to active duty"
Tim Y : "REPRICE: 11:00 AM - NYCB Better"
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