MBS RECAP: As Initial Headline Shock Fades, Bonds Level-Off

By: Matthew Graham •

The amount of geopolitical turmoil in the world today is not materially better than yesterday, but without new surprises to fuel safe-haven demand, bond markets found no reason to extend the rally.  That said, if the rally was somehow overdone or made stronger by something like 'snowball buying,' we would know it today.  The fact that there wasn't a more pronounced pull-back is a testament to the gravity of the situation and the real presence of safe-haven demand yesterday.

MBS started the day about 3/32nds weaker and are now heading out in roughly the same territory.  The weakness was more severe heading into the noon hour, but 10 yields had a firm bounce at 2.50%, which marked the end of selling momentum in bond markets for today.

Weekends can always bring significant developments when it comes to geopolitical market movers.  More often than not, if US bond markets have rallied on geopolitical risk heading into the weekend, they move in the opposite direction the following week.  As far as how that plays out this time, volatility is potentially higher than normal considering a relative lack of calendar events in the week ahead.  That may leave markets even more sensitive to headlines as there's not much else going on.

The week after that is the polar opposite, with the first look at Q2 GDP, an FOMC Announcement, and NFP on Friday.  It may well set the tone for the next major move.

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
98-18 : -0-04
FNMA 3.5
102-12 : -0-03
FNMA 4.0
105-18 : -0-01
Treasuries
2 YR
0.4838 : +0.0198
10 YR
2.4854 : +0.0104
30 YR
3.2922 : +0.0032
Pricing as of 7/18/14 4:01PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:10PM  :  Sell-Off Subsides For Now; Slightly Diminishing Reprice Risk
12:28PM  :  ALERT ISSUED: Negative Reprices Increasingly Possible
11:21AM  :  ALERT ISSUED: On Shaky Ground; Negative Reprice Risk Looming
9:03AM  :  Bond Markets Weaker Overnight; Bouncing Back Into Domestic Session
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
sklodzin  :  "Hey all, do any of you know of a specific rule that dictates the need to separate non married coborrowers on 1003's?"
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?"
Joseph Moran  :  "first rate sheet of the day. basically no change"
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"
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."
Josh Olson  :  "DC: Fannie Mae MRI guide states no more than 10%"
Oliver Orlicki  :  "mg, we on the 3.5 or 4?"
Alan Craft  :  "3.5 most relevant right now"
Matthew Graham  :  "yes. 4.0 is relevant, but 3.5 certainly more relevant to reprice risk."