MBS RECAP: Pre-FOMC Consolidation and Nothing More

By: Matthew Graham •

What a boring 3 days!  The only thing that's happened for bond markets is an utterly mechanical trend back toward Thursday morning's low yields and/or the epic long term inflection point centered on 2.05.  Volumes have been low and trading ranges increasingly narrow. 

The only apparent reaction to data occurs when the data supports the predisposition to return to the neutral technical territory.  This morning's Housing Starts data was no exception.  Yields moved higher afterward despite a much weaker-than-expected reading.  Yields moved higher because they'd reached the boundary of the 2.04-2.08 inflection zone.  Another way to look at this would be to say yields moved higher because they briefly overshot 2.05%, which is the dominant single pivot point (any trading level that tends to result in 'bounces' more frequently than 'breaks') of the past month.

But again, none of this minutia matters.  It's all about the Fed tomorrow.  Forget technicals and pivots, and inflection points, etc.  The market is expecting some level of hawkishness from the Fed, but we can't be sure exactly how much.  To whatever extent the Fed exceeds those expectations, rates are moving higher.  To whatever extent they undershoot, rates are moving lower. 

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
101-13 : +0-02
FNMA 3.5
104-12 : +0-00
FNMA 4.0
106-17 : -0-01
Treasuries
2 YR
0.6740 : +0.0210
10 YR
2.0510 : -0.0220
30 YR
2.6020 : -0.0440
Pricing as of 3/17/15 4:55PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:01PM  :  ALERT ISSUED: Slight Increase in Negative Reprice Risk
9:32AM  :  Paradoxically Giving Up Some Gains After Weaker Overnight Data
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Jason York  :  "Dear Valued Client, As you may have noticed, the turn time for transcript requests submitted to the Internal Revenue Service (IRS) has recently been longer than the previous normal turn time of 1-2 business days. The IRS has informed us that due to budget cuts affecting all areas of the Service, the longer turn times are expected to continue for the foreseeable future. Therefore, we recommend that you take into account the longer turn times, now generally running four to five business days, when planning your workflow "
Jason York  :  "we received a notice that the IRS was shortstaffed and transcripts would be taking a lot longer to get, or at least something like that"
Sergio Szyrko  :  "yes on mine there was no principal forgiven, and they're saying fannie is no longer accepting ANY loan mod, if its not a current fannie loan... if that's true, that is not good"
Justin Dudek  :  "Just had the same question... response straight from my Scenario Desk: "I would need to review the modification agreement to see if any portion of the principal was forgiven.""
Sergio Szyrko  :  "has anyone seen the latest Fannie rules on refinancing a modified mortgage? my u/w was telling me even if payments have been on time since the mod, we can't refi if it was not a fannie backed loan to start with. "
Steve Chizmadia  :  "We've had a nice run since the NFP report that sent us from 2.10 to 2.25 on the 10 yr. We've recovered all those losses and then some with another event tomorrow that could easily take us back to those levels and wipe out the gains we saw over the last week and change. If we see a big swing for the worse immediately following the release, pricing will be suspended and fast. I'm not chancing it and plan on locking a few floaters after discussing this with my clients by end of business today, or worst case, prior to the release tomorrow. "