MBS MID-DAY: Bond Markets Play it Safe Ahead of FOMC Events

By: Matthew Graham •

Bond markets were slightly stronger again overnight but in the context of the past few weeks, we're essentially flat for the past 3 days.  This consolidative 'leveling-off' was reinforced mid-morning as bond markets shied away from making any sudden movements ahead of this afternoon's big-ticket events. 

Long story short, bond markets are playing it safe.  The 'coarse adjustments' to trading positions were already made by the end of last week and everything since then has amounted to rather inconsequential 'fine-tuning.' 

Today, "playing it safe" means the morning strength was greeted with weakness that brought trading levels right to the center of yesterday's trading range.  Trading levels are still in slightly positive territory day-over-day, but this has a lot to do with the fact that yesterday closed at its weakest levels.  Nothing that happens between now and 2pm is remotely important compared to what might happen after 2pm.

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
97-29 : +0-04
FNMA 3.5
101-22 : +0-03
FNMA 4.0
104-32 : +0-02
Treasuries
2 YR
0.5360 : +0.0000
10 YR
2.5720 : -0.0170
30 YR
3.3380 : -0.0160
Pricing as of 9/17/14 12:35PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:07AM  :  ALERT ISSUED: Negative Reprices Already a Consideration for Some Lenders
9:43AM  :  Bond Markets Maintain Same Consolidative Pace Ahead of Fed
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
John Tassios  :  "If UW has the file and findings already with a refer, then UW is correct. However, if resubmit loan to new UW - new investor and have new findings with a new DU file # with lower CC balance and updated FICO scores, then new UW will accept based on that info."
Sung Kim  :  "also, how do you know that increasing 26 points will turn it in to A/E?"
Sung Kim  :  "it was a refer prior to pay down, which means he/she did not qualify"
Sung Kim  :  "theoretically correct"
Robert Rippy  :  "OK guys, what is your interpretation of this FNMA guideline. I have a client with a $2965 balance on a credit card. If he pays the balance down to $2765 his credit score goes up 26 points and should go from a refer to an approved. Underwriter says a borrower can't pay down debt to qualify for a loan. Is the underwriter's position correct in this scenario?"
John Tassios  :  "getting back to CPI data, my opinion is that you will see very low inflation getting lower in coming months. several factors: QE ending will provided less liquidity, Japan / Eruope in deflation, China has slowed down so they buying USD and US bonds to lower thier currency for exports, thus China exporting deflationary exports, Energy and Commodities dropping like a rock. Just my opinion on this and not that of MBS Live."
Sung Kim  :  "Energy costs down big due to USD"
Matthew Graham  :  "RTRS- U.S. AUG CPI YEAR-OVER-YEAR +1.7 PCT (CONS +1.9 PCT), EXFOOD/ENERGY +1.7 PCT (CONS +1.9 PCT)"
Matthew Graham  :  "RTRS - U.S. AUG CPI -0.2 PCT (-0.2022; CONSENSUS UNCHANGED), FIRST DECLINE SINCE APRIL 2013; EXFOOD/ENERGY UNCHANGED (+0.0143; CONS +0.2 PCT), FIRST TIME UNCHANGED SINCE OCT 2010"