MBS MID-DAY: Giving Back Some Gains; Mostly Uneventful; Some Reprice Risk

By: Matthew Graham •

Sometimes the 2nd day of a big geopolitical move will spiral into a volatile blaze of glory.  Other times, it's like today.

Bond markets are calmly marching to slightly weaker levels.  The same narrow trend has been intact all morning.  It began PERFECTLY in line with the 8:20am bond market "pit" open.  It was reinvigorated by stock market strength.  Global markets are simply trading in a "risk-on" direction (stock prices and bond yields higher) after yesterday's big "risk-off" move.

As expected, the recent underperformance of MBS is allowing them to stand stronger in the face of broader bond market weakness this morning.  For instance, MBS have given up just UNDER half of yesterday's gains while Treasuries have given up just OVER half of theirs.

Overnight, Treasuries were more volatile.  10yr yields made highs at 2.494.  10's are currently at 2.4836.  We'll be watching to see what happens if they make it back to that overnight high (also yesterday morning's low).  On a break higher, the next technical target would be 2.51.  More importantly, it would likely push MBS into widespread reprice risk territory.

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
98-16 : -0-06
FNMA 3.5
102-10 : -0-05
FNMA 4.0
105-16 : -0-03
Treasuries
2 YR
0.4757 : +0.0117
10 YR
2.4836 : +0.0086
30 YR
3.2954 : +0.0064
Pricing as of 7/18/14 12:12PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:21AM  :  ALERT ISSUED: On Shaky Ground; Negative Reprice Risk Looming
9:03AM  :  Bond Markets Weaker Overnight; Bouncing Back Into Domestic Session
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Josh Olson  :  "DC: Fannie Mae MRI guide states no more than 10%"
Brent Borcherding  :  "JO, is there a specified reason the group owns the 30%. We have an investment condo in Chicago that the builder was required to keep 30% for rentals in a redeveloping neighborhood, it was part of the agreement with the city. Fannie approves the condos, on a case by case basis, if documented."
Dan Clifton  :  "josh that should be fairly easy. at 80% you need a full review which is appraisal, condo questionnaire, budget, condo docs insurance, the max number of investment units is 49% on conventional for exisiting complexes"
Joseph Moran  :  "first rate sheet of the day. basically no change"
Josh Olson  :  "UW question: Condo purchase, Conv financing, 80% LTV, 808 credit, 183 units BUT 30% owned by investment group. Who will finance this loan?"
John Tassios  :  "I agree with MG's post. today you will have buying today ahead of the weekend for safety. But, next week could be a snap back selloff too."