MBS RECAP: Payrolls-Inspired Positivity Follows Through with Help From Stocks

By: Matthew Graham •

The past few weeks have marked the first time in a long time that we've had occasion to consider the proverbial "stock lever" (the phenomenon whereby bond markets strengthen and stocks weaken, or vice versa).  The changeover between years is a good time for such discussions as there are always "asset allocation" considerations leading some accounts to put more or less into stocks or bonds.

The end of 2013 was clearly "stock-heavy" and "bond-light," meaning stocks got all the love and bonds got shafted.  The highest stock prices remain on 12/31 at the close of business.  But the New Year didn't bring an instant 180­­­° turn in momentum.  Up until last Friday actually, stocks were poised to break recent highs and bonds were having difficulty moving lower in yield. 

Friday's payrolls data changed that for bonds, and brought stocks back from their attempt at the highs.  Now today, when S&P futures broke just barely below Friday's lows, a heavy wave of selling followed.  There's no direct 1:1 relationship with stocks and bonds, but that much selling was clearly a net-positive for bond markets that were otherwise coasting sideways heading into the noon hour.  As it stands, we picked up another few bps in Treasuries and another 3-5 ticks in MBS Prices. 

Retail Sales likely sets the tone for tomorrow.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
96-09 : +0-12
FNMA 3.5
100-20 : +0-12
FNMA 4.0
104-02 : +0-09
Treasuries
2 YR
0.3620 : -0.0160
10 YR
2.8285 : -0.0315
30 YR
3.7735 : -0.0225
Pricing as of 1/13/14 4:57PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:35PM  :  Positive Reprices as Stocks/Bonds Test Technical resistance
9:38AM  :  Slow Start; Slightly Positive; No Data
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Bryce Schetselaar  :  "even though the gfees/llpas may eventually come and rates will probably continue the trend upward, it's nice to get a little reprieve"
Jeff Fullmer  :  "Wells Fargo, like many lenders. State that for a discount point to be Bona Fide: A discount point is “bona fide” if it reduces the consumer’s interest rate by an amount that reflects "established industry practices" How would you determine what "Established Industry Practices" are? "
Ira Selwin  :  "Some are going by 1 disc = 1/4 in rate"
Tim Robinson  :  "We can no longer see the LLPA adjusters in Optimal Blue when locking a loan. I was told it's a QM guideline. Very stupid. It's important to see the adjustments so you can tell what needs to be improved to get a better rate/price for the borrower. Ah yes, it's the "New Rules" that are meant to help the consumer. How dumb of me to forget that part"
Ira Selwin  :  "Either that or the disclosure needs to point to the website where they can obtain the counselors."
Ira Selwin  :  "In Encompass I think it is "Home Counseling Providers Form""
Matt Hodges  :  "in Calyx, it's HOEPA - Homeownership Counseling List"
Andy Pada, Jr.  :  "for this and many, many other reasons, this site is invaluable."
Economic Calendar
Time Event Period Actual Forecast Prior
Tuesday, Jan 14
8:30 Import prices mm (%)* Dec 0.3 -0.6
8:30 Retail sales mm (%)* Dec 0.1 0.7
8:30 Export prices mm (%)* Dec 0.1 0.1
10:00 Business inventories mm (% ) Nov 0.3 0.7