MBS MID-DAY: Uneventfully Holding Yesterday's Gains
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
Yesterday's rally was strong. Today, not so much. That's OK because if we were to extend the rally (2 day rally, really, totaling over a point of improvement in MBS Prices) any further, it would start begging for short term profit taking. In fact, we've probably already seen some and in grand fashion earlier this morning when Treasuries began moving off their overnight lows between 7 and 8am. While 10yr yields were slightly lower a few hours earlier, keep in mind that profit-taking doesn't occur right at the best levels, but rather, just below them (or above them, in the case of yields). After all, why sell at the lowest yields of the day if they might keep going lower? Instead, traders tend to set stops so that the profit-taking is triggered when the market pulls back by a certain amount. This allows a rally room while still accomplishing the goal of booking profit (we're essentially talking about the "trailing stop" concept).
The selling in the 7am hour set a floor for Treasury yields from then on (near 2.562). On the other side of the range, 2.59 continues to offer technical support, and we've remained between these two technical levels ever since. To clarify, the actual technical boundary on the lower side of the yield range is more like 2.55. 2.56+ is just where the profit-taking sales were triggered.
The narrow, slightly stronger range for Treasuries has paved the way for a narrow, slightly stronger range for MBS. There's a slight negative bias coming off opening highs, but all told, we've maintained an 8 tick (.25 point) range for Fannie 3.5 prices and most of it has been spent 3-5 ticks higher than yesterday's close. At this point in the day, volume is beginning to die down and the biggest trading decisions have already been made. Focus is shifting to Tuesday's Nonfarm Payrolls release.
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.
9:44AM :
Bond Markets Pull Back From Overnight Rally; Still Positive For Now
Bond markets rallied impressively overnight with the strongest surge occurring into the 330am hour. German Bund and US Treasury futures added to each others' momentum, but the strongest move was in Treasuries, following a break of yesterday's best levels.
This was also a technical line in the sand--something just over 2.58%. During the narrow, range-bind in early October, we'd looked to 2.55 and 2.47 as the next two significant technical levels. 2.55 arrived quickly after the 3:30am surge, but offered firm resistance. Big block sales ("block" = large volume single trades) put an exclamation point on the 2.55 resistance in the early morning hours and bonds have been heading the other way ever since.
This is less detectable in MBS, which have outperformed by holding sideways near opening levels and are still more than an eighth of a point better on the day. But 10yr yields are essentially breaking even right now, and right in line with the pivot point in the mid 2.58's. A strong bounce lower in yield here would be a very strong clue as to the pre-NFP set-up, but no strong bounce wouldn't have much of an implication.
There is no significant data on the calendar. Several Fed speakers show up later in the session. We're mostly watching technical levels with the aforementioned 2.58+ being the current hot topic.
This was also a technical line in the sand--something just over 2.58%. During the narrow, range-bind in early October, we'd looked to 2.55 and 2.47 as the next two significant technical levels. 2.55 arrived quickly after the 3:30am surge, but offered firm resistance. Big block sales ("block" = large volume single trades) put an exclamation point on the 2.55 resistance in the early morning hours and bonds have been heading the other way ever since.
This is less detectable in MBS, which have outperformed by holding sideways near opening levels and are still more than an eighth of a point better on the day. But 10yr yields are essentially breaking even right now, and right in line with the pivot point in the mid 2.58's. A strong bounce lower in yield here would be a very strong clue as to the pre-NFP set-up, but no strong bounce wouldn't have much of an implication.
There is no significant data on the calendar. Several Fed speakers show up later in the session. We're mostly watching technical levels with the aforementioned 2.58+ being the current hot topic.
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.
Jason Harris : "So if you close prior to paystubs and don't get them...you have a problem"
Jason Harris : "Fannie does not address it specifically other than to say that paystubs sufficient to calc income are in the file at delivery"
Clayton Sandy : "They have to have 2 months reserves and start within 60 days of the close date. "
Clayton Sandy : "I think Freddie will allow it. I've used BB&T in the past to get it done. "
Jason Harris : "We typically want 30 days apaystubs.....but I can get an exception to close once they start and collect paystubs post close in most cases"
Ross Miller : "I have had trouble with this, where most lenders want a paystub. Remember you are supposed to do a verbal within 10 days of the closing and you can't do that if he has not started."
Ted Rood : "In the past, I've needed an unconditional job letter, with no "subject to background, drug checks" verbiage."
Victor Burek : "as Joon said, check for overlays..some lenders will require month of paystubs"
joon choi : "yes, you should be able to do it but check your lender overlay"
Roger Moore : "scenario question- we have a borrower that is moving from florida to NC. Borrower starts his new job on nov 11 and he is employed at his current job until nov 1. it's a salaried job and he has an offer letter. loan is supposed to close next week. is this doable without paystubs? "
Christopher Stevens : "I would think next big move would have to be after release of NFP"
Jeff Anderson : "Ha.i could go for another Green Monster today, CS."
Oliver Orlicki : "hey, I will take the green though"
Oliver Orlicki : "we were at 2.54 an hour ago"
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