MBS RECAP: Outperforming Treasuries; Heading Out at Best Levels

By: Matthew Graham •

Bond markets overall have seen a fair share of ups and downs today, albeit in a narrow range.  But where Treasuries took 2 steps back, MBS usually only took 1.  Where Treasuries took a step forward, MBS usually took 2.  Thus we find ourselves near the end of the day with MBS in positive territory vs Friday's latest levels while Treasuries remain in the red.

That's not a typical scenario unless both sides of the market are fairly close to unchanged and today is no exception.  While it's nice to say MBS are at their best levels of the day, the outright improvement stands at 2/32nds in both Fannie 3.5s and 4.0s.  As for 10yr yield weakness, they're up a modest .012% at 2.746. 

Inspiration was every bit as limited as it has been of late.  To whatever extent equities markets offered cues for bond markets, it was a great day for us!  Case in point, S&Ps were up over 20 points at times which is the sort of gain that's usually associated with a bigger loss in Treasuries (assuming the stocks and bond yields are moving in the same direction in general). 

There are several considerations in the coming days regarding potential market movers, but the default theme remains one of indecision and confusion.  We won't know what changes that until after it arrives.  Between now and then, movement is limited and generally focused on long-term central pivot points (i.e. 10yr yields swirling around 2.75-ish and Fannie 4.0 MBS just over 104-00.

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
96-15 : +0-01
FNMA 3.5
100-24 : +0-01
FNMA 4.0
104-07 : +0-01
Treasuries
2 YR
0.3262 : +0.0082
10 YR
2.7463 : +0.0123
30 YR
3.7048 : +0.0088
Pricing as of 2/24/14 4:26PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:32PM  :  Reprice Risk Ebbs as Bonds Bounce Back, More MBS Outperformance
12:46PM  :  ALERT ISSUED: Treasuries Break Support; MBS More Affected; Edge of Reprice Risk
11:52AM  :  Yields Following Stocks Higher; 10's at Weakest Levels, but MBS Outperform
9:14AM  :  Bond Markets Bouncing Back after Slightly Weaker Open
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Andy Pada, Jr.  :  "is it a violation of RESPA to pay a company a % of gain on sale for leads that close?"
Jason Anker  :  "AP seems not to be the case with L Tree"
Andy Pada, Jr.  :  "what does L tree do?"
Jason Anker  :  "they take a %, not of profit but % of loan amount + flat fee"
Jason Anker  :  "I will say this is years ago but RESPA is and was unlike Dodd Frank and CFPB"
Andy Pada, Jr.  :  "but it seems to me that paying a % of the gain on sale for a closed loan lead is a pretty clear RESPA violation for a kickback. Not sure what the other side of hte argument is?"
Billy Harter  :  "from my understanding, the conv 97% went away...is that correct?"
ComFirst  :  "The one thing I must say about the difference between the classes- We all know two things. 1. Interest only Arms were predatory loans that took advantage of lower income borrowers."
ComFirst  :  "2. The vast majority of the interest only Arms are now Jumbo loans. (And relatively common IMO)."
Geoffrey Cooper  :  "Someone earlier asked about 97s ... Actually, Fannie Mae gives HFAs a variance to 97/105 under its HFA Preferred product set. Loan must be funded by or sold to an HFA ..."