MBS RECAP: Second Day of Post-FOMC Consolidation
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
When we talk about consolidation, we're generally talking about MBS Prices or interest rates moving counter, in some way, to a larger or longer-term movement in the other direction. If prices shoot rapidly higher and then move modestly lower or even just sideways, that's a consolidation. The idea is that markets are either moving with concerted effort or cooling down from such a move.
With that in mind, every bit of trading since the FOMC rally has been one of these "cool-down" periods where bond markets are consolidating their gains, generally growing less volatile and seeking out some sort of central zone. Oftentimes there will be a clue as to where this zone will be based on a prominent bump in the road during the initial move. There's just such a bump for both Treasuries and MBS during the initial leg of the post-FOMC rally, and very simply put, they've spent the rest of the week honing in on these levels.
For 10yr Treasuries, that's about 2.74% and for MBS, about 103-30 in terms of Fannie 4.0s. While it's nice not to be losing any ground today, the fact that we've moved to consolidate the gains tells us precious little about what lies ahead. The door remains open for another push into slightly better territory, but next week's auctions and economic data pose moderate risks. NFP in the following week poses and even bigger risk, but if it adds to the weakness in the last report, could be the confirmation needed to make the next concerted move higher for MBS.
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.
3:23PM :
ALERT ISSUED:
Volatility Starting to Hit; Negative Reprice Risk Increasing
It's still a bit early for most lenders, but some may soon be considering negative reprices as MBS are more than 4 ticks from their highs. Fannie 4.0s are down to 103-29 after highs of 104-02 earlier, making for a 5 tick gap (5/32nds or .15625).
Volume is very low today, adding to the potential volatility. So far, things have been pleasantly surprising in terms of the lack of volatility. They're not getting out of control in any way now, but we have lost enough ground that some measure of negative reprice risk is present.
It's important to note the timing of your last available rate sheet, however, as some lenders are still on sheets from before 11am Eastern. In those cases, MBS prices were lower at rate sheet time, effectively eliminating reprice risk due to market movements (lenders can still reprice for other reasons, but those can't be predicted based on market movement).
If you're looking for sort of a "bottom line," here it is: if you were planning on floating over the weekend anyway, we're not seeing anything that would sway you from that decision. If you were planning on locking before the end of the day, now's the time.
Volume is very low today, adding to the potential volatility. So far, things have been pleasantly surprising in terms of the lack of volatility. They're not getting out of control in any way now, but we have lost enough ground that some measure of negative reprice risk is present.
It's important to note the timing of your last available rate sheet, however, as some lenders are still on sheets from before 11am Eastern. In those cases, MBS prices were lower at rate sheet time, effectively eliminating reprice risk due to market movements (lenders can still reprice for other reasons, but those can't be predicted based on market movement).
If you're looking for sort of a "bottom line," here it is: if you were planning on floating over the weekend anyway, we're not seeing anything that would sway you from that decision. If you were planning on locking before the end of the day, now's the time.
12:08PM :
ALERT ISSUED:
Positive Reprice Potential Picks up as MBS Push Higher Highs
Fannie 4.0s are now up 6 ticks on the day, hitting 104-01 for the first time. 10yr yields are down 2.5bps to 2.726. There are no significant headlines or events behind the move and volume remains fairly light as well. Tradeflows relating to the options/futures expiries have simply bullied prices higher amid a light liquidity environment.
Regardless of the cause, the movement is sufficient to consider positive reprice potential.
Regardless of the cause, the movement is sufficient to consider positive reprice potential.
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- REUTERS POLL-U.S. FEDERAL RESERVE WILL BEGIN TRIMMING MONTHLY BOND BUYS BY $15 BILLION, SAY ECONOMISTS "
Matthew Graham : "RTRS - REUTERS POLL-U.S. FEDERAL RESERVE TO TAPER MONTHLY BOND PURCHASES IN DECEMBER, SAY 42 OF 61 ECONOMISTS "
Jason Anker : "yup, i think most agree with George, most on the street at least"
Matthew Graham : "and the market reaction would have been the same, or close to it."
Matthew Graham : "I agree with her and Fink, Fed had "free pass" to taper at least a little bit."
Matthew Graham : "RTRS- FED'S GEORGE: REDUCING QE WOULD HAVE ALLOWED MARKETS TO ADJUST GRADUALLY; FED CREDIBILITY NOW AT RISK "
Jason Anker : "UNLESS - you did the loan 3 months ago and your not a broker"
Jason Anker : "i've had same where UW never asked to confirm the type of financing on prev refi so no problems"
Clayton Sandy : "I've had issues before in that exact same situation. Had to refi his current primary into an investment"
Rob Clark : "The deed of trust states they will occupy for 12 months. "
Ashley Sanchez : "Client completed an oo refi 3 months ago and is purchasing oo now with 20% down...I know the conservative answer to this but does gnma/fnma really care about this? I cannot find anything in writing besides people's experiences or opinions"
Charles Tadros : "REPRICE: 12:37 PM - Flagstar Better"
Rob Clark : "REPRICE: 12:34 PM - Provident Funding Better"
Andy Pada : "we will all make our own decisions but these lines sure makes today a bit brighter: The post FOMC rally was a measured move! It was arguably more of a sea-change in the reality of monetary policy than markets gave it credit for in response. That makes yesterday seem like a consolidation and the upcoming two weeks seem like a chance to rally through next week's auction process and into month end before circling the wagons for NFP in the following week. 10's could easily push 2.55 around NFP t"
Ted Rood : "doesn't everyone read it? It's in the paper in St Louis."
Andy Pada : "Did you guys check out MG's morning update?"
Andy Pada : "http://www.mortgagenewsdaily.com/mortgage_rates/blog/324985.aspx"
Victor Burek : "great info guys, thanks"
anthony vandyke : "correct, i used 50% as an example"
Hugh W. Page : "TIC could be any percentage distribution but typically equal shares"
anthony vandyke : "Tenants in common means they each own 50% seperately, and if one dies the 50% ownership will be passed on to whoever they choose."
anthony vandyke : "jont tenants means they both own 100% of the property and if one dies the other still owns 100% with going to probate"
Tim Y : "depends on whether or not they have same amount in ownership, JT is equal ownershit, TIC is based on percentage. "
Victor Burek : "what is the difference"
Hugh W. Page : "Coul be either VB"
anthony vandyke : "Victor, that is the borrowers choice, they can choose how they would like to be vested"
Victor Burek : " title question...mom and son on loan and title...are they tenants in common or joint tenants? "
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