MBS RECAP: No Daytime Drama Following Overnight Action

By: Matthew Graham •

If you wanted to see any significant movement in bond markets today, you had to be tuned in before 10am.  Even then, most of the drama occurred right at the start of Asia's business day following a big miss in Japan's GDP.  Stocks and bond yields fell in concert, and fans of low mortgage rates rejoiced. 

But the bond market levity was short-lived.  The problem with the Japan-inspired rally is that it took trading levels farther than they were programmed to go to start the day.  Incredibly firm (and uncannily robotic) technical resistance kicked in for 10yr Treasuries at 2.28, and yields never made it any lower despite 100's of attempts between 8:30pm and 2am. 

At that point European bond markets began their day with one major, positive adjustment to catch up to the Treasury rally and then spent the rest of the day moving into gradually weaker territory.  The least gradual moments occurred around 8:40am when a confluence of European Central Bank headlines, large block trades in Eurodollar futures, and a rapid increase in corporate debt-related tradeflows conspired to push bond markets quickly to their weakest levels of the day. 

From that point on, bonds barely budged.  As a testament to the Treasury-specific stresses brought on by the corporate debt hedging, MBS visibly outperformed.  Fannie 3.5s closed in positive territory while 10yr yields rose 2bps by 5pm.

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
100-02 : +0-01
FNMA 3.5
103-14 : +0-01
FNMA 4.0
106-06 : +0-01
Treasuries
2 YR
0.5120 : -0.0039
10 YR
2.3400 : +0.0213
30 YR
3.0640 : +0.0209
Pricing as of 11/17/14 5:20PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:46AM  :  Pulling Back After Strong Overnight Gains
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "Even in terms of Treasuries, holding ground at 2.34-ish is preferable to last week's battles at 2.38-ish."
Matt Hodges  :  "how could it be bad when MBS outperform Treasuries?"
Victor Burek  :  "wouldn't say it was a good day, but it wasn't a bad day"
Andy Pada, Jr.  :  "can someone tell me if today was a good day or a bad day for us?"
Clay Schmeisser  :  "GOTCHA... great info to know for future reference... again why I love this MBSLive site... everyone is full of knowledge"
Andy Pada, Jr.  :  "nice info. JY"
Jason York  :  "this is more of just an FYI, as I just ran into it last week in trying to get a file CTC. On a VA loan, with same-sex married couples, you are required to get that pre-approved by VA. It isn't the normal pre-approval process, where you have to send in the whole file, but just basically when they were married, where they were married, and where the new house will be, then it is sent up to the VA legal department to decide whether the non-veteran spouses income can be used. I had a short panic, as they said it could take up to 10 days, but it literally took an hour after we sent it up. "
Jason York  :  "your findings will probably say this: Verification of veteran's source of funds is not required if closing costs plus difference between sales price of the property and the base loan amount is < 4 percent of the lesser of the following: 1) Sales Price 2) Reasonable value established by a Notice of Value (NOV)."
Jason York  :  "yes, your UW is wrong, have them call VA, and they will tell them it is ok for the borrower to pay for a termite inspection on a refi, that is only party in the transaction"
Timothy Baron  :  "I did a VA refi last month SL. Veteran paid for termite report. Your UW or whomever is wrong."
Clay Schmeisser  :  "VA transfers between a buyer's bank acct and a family member. UW is requiring a gift letter and copies of the other family members bank stmts. Isn't the VA rule as long as the transfers or cash deposits don't exceed 25% of the purchase price, they do not need to be sourced?"
Scott Lushing  :  "I was told we have to now credit the borrower for his termite since they cannot be charged but online everything says they cannot be charged on a purchase. VA will not put in writing they can pay on a refinance"
Sung Kim  :  "MH - http://mndne.ws/1w3tP2Y"
Matt Hodges  :  "for anyone handling CT closings - can you confirm no tax stamps?"