MBS MID-DAY: Bond Markets Stronger, but Struggling With Resistance
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
Treasuries were strong and steady overnight, building the sense that Friday afternoon's weakness was more a factor of investors pulling up stake for the weekend only to come back to similar positions on Monday morning. 10yr Treasuries tell this story well as yields sneaked into the 8am at 2.916, just under the 2.917 level that marked 12noon on Friday (the thought being that most of the "real" trading on NFP day, and many others, is done by noon, despite 5 more hours on the clock).
MBS are in positive territory as well, moving higher right at the open and running into an old friend shortly thereafter. The friend in this case--the range of Fannie 4.0 price levels in the immediate vicinity of 102-24-- has a bit of split personality. If MBS have approached from above, this range has been more likely to offer support. If approached from below (like today), it's been more likely to act as resistance (or 'ceiling' in terms of MBS Prices).
So far, that's what we're seeing as 102-24 has been the average price since 9am with no more than 3 ticks of movement on either side. We're currently keeping an eye on a short term floor around 102-22 as well as a ceiling in 10yr yields that may prove as an early warning sign that the MBS floor is at risk. Both of these are marked on the real-time charts for MBS Live subscribers. Until those are broken, there's no major reprice risk, and without any meaningful data or events on tap today, we can only wait for floor or ceiling to break before drawing any conclusions.
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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Morning 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 morning.
9:46AM :
Bond Markets in Stronger Territory amid Limited News/Data
There has been little to write home about during the overnight and early domestic sessions though bond markets are maintaining a positive stance so far. Treasuries began Asian hours holding steady despite big gains in Asian equities markets. 10yr yields had fallen a few bps by the start of the European session whereupon they made their best gains despite positive European economic data.
2.914-2.92 came into play as a supportive ceiling in much the same way it had been on Friday morning. It's as if this zone was the top of the real trading range and was only broken as markets went home for the weekend. With the new week picking up in activity, it looks to have been the baseline starting point for this morning's range--not an uncommon Friday to Monday dynamic.
The domestic session has been quiet so far with 10's moving down to 2.88--not quite to Friday morning's low yields. Meanwhile, MBS are trading above their best levels from Friday with 4.0s up 14 ticks on the day at 102-25, This is right in line with one of the 4 major pivot points that have defined Fannie 4.0 MBS movement since mid June (104-10, 103-16, and 102-02 being the other 3).
As such, we're more likely to see resistance to further improvements, but those doors could open if Treasuries do more to challenge their best levels from Friday. That's something they'd have to do without help from any significant calendar events as the rest of the day remains light on data.
2.914-2.92 came into play as a supportive ceiling in much the same way it had been on Friday morning. It's as if this zone was the top of the real trading range and was only broken as markets went home for the weekend. With the new week picking up in activity, it looks to have been the baseline starting point for this morning's range--not an uncommon Friday to Monday dynamic.
The domestic session has been quiet so far with 10's moving down to 2.88--not quite to Friday morning's low yields. Meanwhile, MBS are trading above their best levels from Friday with 4.0s up 14 ticks on the day at 102-25, This is right in line with one of the 4 major pivot points that have defined Fannie 4.0 MBS movement since mid June (104-10, 103-16, and 102-02 being the other 3).
As such, we're more likely to see resistance to further improvements, but those doors could open if Treasuries do more to challenge their best levels from Friday. That's something they'd have to do without help from any significant calendar events as the rest of the day remains light on data.
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.
Tim Y : "AFR might. "
Curt Sandfort : "Mike, did one with American Southwest a few months back, I think they sold it to Nationstar immediately"
joon choi : "i believe freedom mortgage does"
Jeff Weaver : "MD.....Union National Mtg and Mid Island, done one with each"
Mike Drews : "I asked this question last week but didn't get a response..is anyone out there still doing investment property FHA streamlines?"
John Rodgers : "I'm thinking 5b also, gives the markets some taper but bonds a boost because of over reaction"
John Tassios : "MG, I think the 1st taper will be a small one at 5 bil to test the waters and see market reaction"
Jason Harris : "We are either growing slowly but surely and it will continue in the face of rising rates or we look more like Japan over the last 20 years....we will find out soon enough..."
Jason Harris : "JT.....we will get to see the taper experiment unfold soon....if you are right....as I tend to believe you are....we will see the conversation shift to adding stimulus next year. "
Matthew Graham : "Looks like the bigger sample size lowered the median from Friday's $12 bln."
Matthew Graham : "RTRS - POLL-FIRST TAPER WILL BE BY $10 BLN, ACCORDING TO MEDIAN OF 69 ECONOMISTS "
Matthew Graham : "REUTERS POLL-49 OF 69 ECONOMISTS EXPECT FED TO ANNOUNCE TAPERING OF ITS MONTHLY ASSET PURCHASES NEXT WEEK "
John Tassios : "for me it has affected at least 25% of my pre qualified buyers deciding not to proceed due to higher rates and higher MIP. add in there that the A+ borrowers, some of them, are paying all cash for purchases and you see why slowdown is happening "
Gus Floropoulos : "I somewhat agree that higher rates will affect overall activity in the lending world, but I seriously doubt it will stop most buyers, some yes, but not most"
Michael Gillani : "Even with rates below 4%, the housing market was far from booming or recovered. It was starting to get some legs and doing a little better, but not good, let alone great. With rates this much higher, this quickly on top of it, it is a recipe for disaster and that's forsure. Small evidence of that is already starting to surface."
Jason Anker : "builder asking his atty about "prevailing rate" anguage this AM"
John Rodgers : "he didn't like the new payment. Was doing USDA and I have not ARM option."
Matt Hodges : "DTI concerns, or just nervous borrowers?"
John Rodgers : "FYI - lost a new construction deal this weekend. Buyer walking way because rate is .75 higher then it was when he wrote. "
Matthew Graham : "RTRS- WELLS FARGO & CO WFC.N EXPECTS $80 BILLION IN MORTGAGE ORIGINATIONS IN THE THIRD QUARTER: CFO "
Matthew Graham : "RTRS- WELLS FARGO & CO WFC.N CFO TIM SLOAN SPEAKING AT INVESTOR CONFERENCE IN NEW YORK "
Gus Floropoulos : "good news is good for stocks, bad news is good for stocks, no news is good for stocks...."
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