MBS RECAP: Government Shutdown Limbo; Bumpy Ride, but Strong Finish
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
In the context of the nearly month-long rally in place since Sep 6th, today's MBS movements were more volatile than average. Fannie 3.5s started the day in line with Friday's highs and ratcheted abruptly lower, especially into 10:30am. The bounce back to unchanged levels was nearly as abrupt, and quickly have way to another tumble to the lows. The day ended with prices progressing steadily to the best levels of the day by the last hour of trade.
This was a mere shadow of the volatility present in Treasuries where 10yr yields broke fully outside Friday's range, both at the lows and highs, by 10:30. Yields bounced twice just over 2.64 before progressing in the same positive direction as MBS into the close. We're reluctant to put too much emphasis on government shutdown headlines though a resolution or lack thereof will still likely have an impact on tomorrow morning's trading levels.
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.
2:59PM :
Cue Political Headlines; Bond Markets Back Near Unchanged Levels
While earlier weakness did result in a few negative reprices, current risk levels are greatly dimished--at least for right now. 10yr yields bounced twice just over 2.64 and have since moved down to 2.62.
MBS have been choppy and lacking in liquidity (meaning buyers and sellers having a hard time finding each other at their preferred prices), but gradually ground their way back into positive territory.
Bond markets may have been more prepared to move into weaker territory today if a government-shutdown resolution looked more realistic than it currently does, but just when you thought the political posturing surely couldn't get more outrageous than last time, the headlines have begun flying.
On one side of the current debate, we have the White House saying that a unilateral decision to raise the debt ceiling wouldn't fly with global markets. On the other side, we have House Republicans calling for Obama and Administration officials to sign up for Obamacare.
Whether or not markets are interpreting this tomfoolery as suggestive of an impasse tonight, or whether we're simply seeing month/quarter-end tradeflows bring money into bond markets isn't exactly clear. Either way, we're back into positive territory, and forced to keep an eye on headlines just the same.
Keep in mind that 3pm is a volatile time on month/quarter-end, as the post 3pm time is technically a new quarter as far as Treasuries are concerned.
MBS have been choppy and lacking in liquidity (meaning buyers and sellers having a hard time finding each other at their preferred prices), but gradually ground their way back into positive territory.
Bond markets may have been more prepared to move into weaker territory today if a government-shutdown resolution looked more realistic than it currently does, but just when you thought the political posturing surely couldn't get more outrageous than last time, the headlines have begun flying.
On one side of the current debate, we have the White House saying that a unilateral decision to raise the debt ceiling wouldn't fly with global markets. On the other side, we have House Republicans calling for Obama and Administration officials to sign up for Obamacare.
Whether or not markets are interpreting this tomfoolery as suggestive of an impasse tonight, or whether we're simply seeing month/quarter-end tradeflows bring money into bond markets isn't exactly clear. Either way, we're back into positive territory, and forced to keep an eye on headlines just the same.
Keep in mind that 3pm is a volatile time on month/quarter-end, as the post 3pm time is technically a new quarter as far as Treasuries are concerned.
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.
Justin Harward : "Tim, I doubt most LOs understand MBS and know what causes rates to move up or down. A lot I talk to think their bank is being greedy or generous when they move up/down"
Tim Y : "MU, I seriously doubt most LO's have their ear to the market than the regular MBS live user. I think it is wise for a consumer to use whatever tools are available to them to make a decision that is in their best interest, regardless of who they are working with, if I was a consumer I would do the same thing. "
Michael Ullmann : "CS: I give them advice and ultimately they make the decision. However their decision coincides with my advice 100% of the time. I do not expect the client to then go pay a monthly fee to be party of a service that tracks mbs pricing and then ask random loan officers whether they should lock or not. This is my job, the entire excercise is cheapining what a loan officer is, if that is even possible anymore."
Tim Y : "LL, depends on the terms, I would say lock, only because rates are as good as they have been in the last 3 or so months, also, based on what has happened over the last few months when rates do rise, it will most likely be quick. "
Clayton Sandy : "I agree too, but on the other hand don't you educate your client on the pros/cons of floating/locking and then have them decide? They might be on here to do research and get informed. Doesn't mean they are working with the wrong person."
Michael Ullmann : "I will say this until I go blue in the face. If you need to come on here and ask advice about whether you should lock from complete strangers who have never met or spoken to you ever, you are working with the wrong loan officer"
Oliver Orlicki : "I would float that far out"
laura lembeck : "same Lock/float consensus for a close on Oct 21? Lock it up?"
Ross Miller : "To be considered stable income, full, regular, and timely payments must have been received for six months or longer. Income received for less than six months is considered unstable and may not be used to qualify the borrower for the mortgage. In addition, if full or partial payments are made on an inconsistent or sporadic basis, the income is not acceptable for the purpose of qualifying the borrower.
For manually underwritten loans, follow the guidelines stated above. For Gemstone AU, refer to "
Ross Miller : "3 months depending on the findings. "
Caroline Roy : "i have a customer who is recently divorced and set to get $2k/mo in spousal benefits. How long do i need to show this to use it for income?"
Matthew Graham : "RTRS- US HOUSE REPUBLICANS WILL SEEK ONE-YEAR DELAY OF 'INDIVIDUAL MANDATE' IN OBAMACARE LAW AS PART OF NEW EMERGENCY SPENDING BILL-SENIOR REPUBLICAN AIDE "
Jason Anker : "just started to look into Norwegian immigration, bye"
Jeff Anderson : "Is Oct 1st the new April Fool's? No way that flies."
Bert Swyers : "did I read that correctly? "
Matthew Graham : "it hasn't been retracted or corrected yet"
Jason Anker : "I'm a little late but the house really said that?"
Andy Pada : "that will only lead to the Dems requiring Congressional leadership to sign up for obamacare. This will not end tonight."
Matthew Graham : "so it's come to this... political theater just jumped the shark"
Andy Pada : "uh what?"
Matthew Graham : "RTRS - US SENATE SENDS BACK TO HOUSE EMERGENCY SPENDING BILL TO KEEP GOVERNMENT OPEN AFTER MIDNIGHT; FATE UNCERTAIN "
Matthew Graham : "RTRS- US SENATE DEFEATS HOUSE REPUBLICANS' BID TO DELAY OBAMACARE FOR ONE YEAR AND TO REPEAL MEDICAL DEVICE TAX "
Matthew Graham : "RTRS- SENIOR U.S. HOUSE REPUBLICAN SAYS LAWMAKERS WILL NOT FORCE GOVERNMENT SHUTDOWN, BUT PROVIDES NO SPECIFICS ON NEXT STEPS BY HOUSE "
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