MBS MID-DAY: Reprice Risk Mostly Dry as Bonds Cope with Post-Data Weakness

By: Matthew Graham

The day began on a strong note with US bond markets led higher in price by an even stronger overnight move in Germany.  Following the mornings' economic data, MBS and Treasuries fell back into just slightly negative territory.

The last update on MBS Live noted that reprice risk had dried up.  That's still true as we head toward the noon hour, but only "mostly" true (in the same way Prince Westley was only "mostly dead" in the Princess Bride).

Fannie 3.0s are down 2 on the day with some lenders looking at 3/32nds of weakness since morning rate sheet print times.  This is NOT typically sufficient for a negative reprice, but it's close.

As of right now, 10yr yields are putting in their second bounce at 1.996 highs.  That's positive, as long as it holds (they didn't bounce hard).  If 1.996 breaks, we'd expect MBS to be insulated from the weakness, but perhaps not enough to avoid being dragged down past that "-4/32nds" line in the sand that connotes more reprice risk.

The next scheduled even is the 7yr auction at 1pm.  While the auction itself isn't typically a market mover, the end of the week's auction cycle can occasionally mark a shift in momentum.  More often than not, it's positive, but it can go either way.


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
101-28 : -0-01
FNMA 3.5
104-23 : -0-01
FNMA 4.0
106-25 : -0-01
Treasuries
2 YR
0.6420 : +0.0360
10 YR
1.9840 : +0.0120
30 YR
2.5780 : +0.0060
Pricing as of 2/26/15 11:41AMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:11AM  :  Reprice Risk Dries Up For Now
9:45AM  :  ALERT ISSUED: Moderate Negative Reprice Risk for a Few Early Lenders
9:17AM  :  Bond Markets Shed Overnight Gains After Stronger Data

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Victor Burek  :  "weekly earnings might be the cause"
Matt Hodges  :  "only durables....that's it and we lose ground"
Matthew Graham  :  "RTRS- US JAN DURABLES ORDERS +2.8 PCT (CONSENSUS +1.7 PCT)"
Matthew Graham  :  "RTRS - U.S. JAN CPI -0.7 PCT (CONSENSUS -0.6 PCT), EXFOOD/ENERGY +0.2 PCT (CONS +0.1 PCT)"
Matthew Graham  :  "" (Reuters) - Due to a delayed opening for U.S. federal government agencies in Washington on Thursday because of snow, there may be a delay in economic data due to be released by the Commerce Department, Labor Department and Agriculture Department at 8:30 a.m""
Matthew Graham  :  "waiting on durables, apparently"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS ROSE TO 313,000 FEBRUARY 21 FEB WEEK (CONSENSUS 290,000) FROM 282,000 PRIOR WEEK (PREVIOUS 283,000)"
Victor Burek  :  "you are assuming they are buying for yield...many buying just to flip back to ECB when there QE starts"
John Tassios  :  "where would you put your $$ ? neg bund yield or a better yielding US TSY"
John Tassios  :  "that's why I feel, foreigners will start rotating into US TSY's and help us out in 2015"
Victor Burek  :  "doesn't have far to go"
John Tassios  :  "wait until their QE kicks in, more neg yields - possibly 10 yr bund too"
Matt Hodges  :  "Germany issued 5 year bunds with negative yields... yea for us"