MBS RECAP: Bonds Lose Ground After Head-Fake Toward Modest Gains

By: Matthew Graham

After Friday's aggressive sell-off, bond markets managed only a modest bounce back before acquiescing to even weaker levels by the close.  There were no data or headline events to motivate any salient runs in either direction today.  This remained true from the start of overnight trading right through to the after-hours domestic close.

Instead, what we had was a blatant lack of sponsorship for Treasuries and MBS after reaching certain levels.  The biggest, hardest floor was hit at 1.885 just after 5am.  In my mind, this is a significant short term level now as it was an utterly unique decision for US bond markets.  European bonds continued to rally until 7am while Treasuries had long since decided to bounce.

Technical levels or not, the simple fact that Treasuries took it upon themselves to bounce early set the tone for the rest of the day.  There was simply no traction to be had.  We can point to things like the upcoming round of auctions in concert with the big Microsoft corporate bond offering saturating the market with debt supply bidding needs, but we won't really know how much of the weakness this accounts for until Thursday at the earliest.  Bottom line: if we're waiting to see where bond traders are going to firmly reenter the market to "buy the dip," we haven't gotten there yet.


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
102-01 : -0-04
FNMA 3.5
104-31 : +0-01
FNMA 4.0
106-30 : +0-01
Treasuries
2 YR
0.6480 : +0.0005
10 YR
1.9650 : +0.0066
30 YR
2.5440 : +0.0132
Pricing as of 2/9/15 7:16PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
4:25PM  :  ALERT ISSUED: Negative Momentum Persists Into Close; Additional Negative Reprice Risk
3:42PM  :  ALERT ISSUED: Right on the Edge of Negative Reprice Risk
10:27AM  :  Bond Markets Remain Tentative After Friday's Sell-Off

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Jeff Nelson  :  "the credit bureau is always correct. Everyone else just needs to change their reality to match. "
Andrew Russell  :  "I think our conclusion here is: If errors exists, fix the errors and assist the borrower. Telling a borrower what to pay down when they never had an intention to do so is very gray area. "
Brian McFarlane  :  "I am all for correcting inaccurate items, I have a file now where I am doing that, and their score increased dramatically. they had several tradelines (old foreclosures) that were still reporting as open. "
Andrew Russell  :  "Brian is correct, coaching a client to pay down balances to get their score artificially higher is considered by the feds to be a huge no no, although many do it. There was a huge suit against a loan officer over here a year ago, and one of the charges was coaching borrower's how to pay down balances to artificially improve their score"
Brian McFarlane  :  "you are talking about two different things MH...if someone typically carries high card balances and only pays them down to get a better credit score in conjuction with a mortgage, that is not a borrower working to correct inaccurate items."
Sung Kim  :  "A rapid rescore fixed inaccuracies in credit. WF not allowing it is a violation of FCRA"
Brian McFarlane  :  "Wells Fargo can only use RR for inaccuracies on credit, not paying down revolving debt"
John Paul Mulchay  :  "Need to make sure you know where file is going to make sure that rescore doesn't muck it up."
Jason Anker  :  "thats the way for some yes"
Michael Prozy  :  "even if you do it before uw?"
Jason Anker  :  "yes JP but there are those that cannot, WF being one of them"
John Paul Mulchay  :  "Not at WF"
Justin Perry  :  "Are most LOs still allowed to use Rapid Rescore to update credit card balances and use the better credit score?"
John Tassios  :  "why not, demand is till weak worldwide and USD is strong"
Frank Hanna  :  "citi sees oil hitting $20 a barrell"