MBS RECAP: Best Levels in Over 3 Months; Current Coupon Shifting
By:
Matthew Graham
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MBS Live: MBS Afternoon Market Summary
MBS hit 3-month highs today--levels not seen since we crashed into them at the end of the day on June 19th. Fannie 4.0s made highs at 104-16 the next day and from there never spent a moment over 104-10 until today. Refreshingly, the break has been a gradual process stemming from the weaker Jobs data and more recently the FOMC Announcement. In that time, we've completely traversed the 3 month range, moving from the lowest lows to the highest highs. Fannie 3.5s are taking over as the current coupon while prices are in this range. So what's a "current coupon?"
Current Coupon - This term can vary in its definition depending on the audience. In a strict capital markets environment, the current coupon is quite simply the coupon value at the price of PAR (or 100-00). In other words, if one MBS coupon of 5.0 had a price of 101-00 and if a 4.5 coupon had a price of 99-00, then the current coupon would be 4.75. Variants of this definition consider current coupon simply as "closest to PAR." Neither of these are technically incorrect, but they are irrelevant for the purposes of MBS Live.
When it comes to MBS Live, the definition is subtly different. Rather than a simple mathematical equation that calculates a hypothetical coupon priced at PAR, and without running the risk of simply assigning the title to the coupon that's closest to PAR, the MBS Live community wants to know WHICH COUPON TO WATCH for the best read on reprice risk and rate sheet changes. In this sense, the definition becomes less mathematical, but conceptually easier: The current coupon is whichever MBS Coupon has the most effect on lenders' likelihood to reprice.
Whereas a mathematical definition would always result in the same current coupon for a given set of prices, the most relevant coupon for rate sheets depends on other factors such as liquidity, volume, Agency guarantee fees and servicing costs to name a few. MBS Live accounts for these factors and automatically selects a current coupon each time users log in.
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.
1:22PM :
Strong 2yr Auction Offers no Objection for Further Gains
The 2yr auction was stronger than expected, with demand that was in line with the last few auctions but buyers willing to accept lower yields. The auction itself didn't cause any new buying motivation for bond markets, but a weak result could have slowed the preexisting trend.
10's moved down to 2.645 and Fannie 4.0s are 10 ticks higher on the day at 104-18. Lenders that haven't already repriced positively are more likely to be considering it if current levels hold are improved upon.
10's moved down to 2.645 and Fannie 4.0s are 10 ticks higher on the day at 104-18. Lenders that haven't already repriced positively are more likely to be considering it if current levels hold are improved upon.
12:00PM :
ALERT ISSUED:
Technical Levy Breached for Treasuries; MBS Slowly Follow; Positive Reprice Potential
On both Wed and Thu last week, 10yr yields bounced at 2.672 and 2.673 respectively. Today had offered the same resistance and had been edging closer to it since the overnight session. Once broken, a good amount of follow-through buying carried yields down to 2.652--the lowest yields since the wee hours of Aug 13th.
MBS had already been outperforming and are now letting Treasuries take the lead (or get caught up, depending on how you want to look at it). Either way, this most recent move is good for MBS, but because of their previous strength, it's not as sharply positive as it has been for Treasuries.
Positive reprices are increasingly possible with Fannie 4.0s up 8 ticks on the day now at 104-16. 10yr Treasuries are holding near 2.653 for now. Volume is still on the light side, but better than yesterday.
Refresh on the word "Technical".
MBS had already been outperforming and are now letting Treasuries take the lead (or get caught up, depending on how you want to look at it). Either way, this most recent move is good for MBS, but because of their previous strength, it's not as sharply positive as it has been for Treasuries.
Positive reprices are increasingly possible with Fannie 4.0s up 8 ticks on the day now at 104-16. 10yr Treasuries are holding near 2.653 for now. Volume is still on the light side, but better than yesterday.
Refresh on the word "Technical".
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.
Hyunsoo Kim : "REPRICE: 2:11 PM - New Penn Financial Better"
Scott Valins : "REPRICE: 2:09 PM - Plaza Better"
Matthew Carver : "REPRICE: 2:08 PM - Flagstar Better"
Hamid Hamrah : "REPRICE: 2:04 PM - PennyMac Better"
Rob Clark : "REPRICE: 1:58 PM - Interbank Better"
LLOYD : "AP Nationstar has had an issue funding closed loans and they are not scheduling any new closings as of now. i just wanted to make sure that i am getting the same info from them that everyone else is."
Michael Ullmann : "JB: I have closed a ton of the same situation no second appraisal needed. Often times the only kick back I get is how the realtor marketed the property, so I get the agent to write a bs letter "
Justin Harward : "CR if your buyer is going to be OO then there is no occ requirement for the rest of the units. If its a second home or NOO then at least 51% have to be OO"
Caroline Roy : "i just did one of those JB. fannie. no second appraisal. we needed the lease since they used the deposit as EM. that was it. "
Sung Kim : "@jb - your uw is wrong"
Jude Bridwell : "Conv question for everyone -- I have a deal where the buyer is renting the home currently and wants to purchase. My u/w is telling me that is non-arms length and requires two appraisals. Anyone else run across that? Thanks"
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