MBS MID-DAY: Widespread Negative Reprices as Monday Pattern Continues

By: Matthew Graham

With corporate issuance subsiding somewhat and month-end tradeflows providing steadier demand, the last week of May proved to be an eye of the storm.  As we discussed last Friday and again this morning, the new month reinvigorates the risks as far as corporate issuance is concerned.  Indeed, most recent Mondays have spoken to the market's general level of anxiety when it comes to accommodating another glut of new debt supply each week.  Today is already off to a fast start, and the rest of the week is expected to remain busy.  The anxiety therefrom is evident in today's bond market losses.

Keep the following in mind at all times during June.  Any dip in rates that challenges the lower recent range will be seized as an opportunity for corporate debt issuers to roll out new deals.  This will make it very difficult to make meaningful progress below, say, 2.10 in 10yr yields.  It's not impossible, but it would take help from this week's big ticket economic data. 

We had our first dose of big data today and ISM Manufacturing only served to accelerate the selling pressure.  Corporate issuance notwithstanding, stronger economic data helps advance the case for a timely Fed rate hike.  In general, if data is strong or improving, it makes September a more likely rate hike month.  The more this week's data surprises to the upside, the rougher things could become for fans of low rates.


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
100-31 : -0-10
FNMA 3.5
104-07 : -0-07
FNMA 4.0
106-19 : -0-06
Treasuries
2 YR
0.6410 : +0.0318
10 YR
2.1790 : +0.0558
30 YR
2.9420 : +0.0594
Pricing as of 6/1/15 1:38PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:24AM  :  ALERT ISSUED: Negative Reprices Increasingly Likely for Early Lenders
10:06AM  :  ALERT ISSUED: Bond Markets Tank on ISM Beat; Negative Reprice Risk Increases for Some Lenders
9:43AM  :  Bond Markets Near Unchanged as ISM Approaches

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
John Murphy  :  "see that all the time. its apparently legal..but the borrowers pay for it in final loan terms..without exception."
Michael Ullmann  :  "CS: I have been dealing with this kind of nonsense. Last week K Hovanian told one of my pre approved borrowers, not only will they lose their 10k credit for working with me but the price of the home will be 5k more"
Clayton Sandy  :  "question about earnest money. Have a client who is building a home and his earnest money is only $2500 if he goes with preferred lender. $7500 if he goes with anyone else. Anyone deal with this before? "
Jason Anker  :  "CFPB simply does not like brokering"
John Rodgers  :  "maybe on their retail side"
Scott Valins  :  "Interesting that Provident, of all the wholesalers, is paying a big settlement to the CFPB for past issues. They have the strictest loan policies."
Matthew Graham  :  "oh yeah, here's construction spending too. RTRS - US APRIL CONSTRUCTION SPENDING +2.2 PCT (CONSENSUS +0.7 PCT) TO $1.006 TRLN, VS MARCH +0.5 PCT (PREV -0.6 PCT)"
Matthew Graham  :  "RTRS- ISM U.S. MANUFACTURING EMPLOYMENT INDEX 51.7 IN MAY (CONSENSUS 49.2) VS 48.3 IN APRIL"
Matthew Graham  :  "RTRS - ISM U.S. MANUFACTURING NEW ORDERS INDEX 55.8 IN MAY VS 53.5 IN APRIL"
Matthew Graham  :  "RTRS- ISM U.S. MANUFACTURING ACTIVITY INDEX 52.8 IN MAY (CONSENSUS 52.0) VS 51.5 IN APRIL"
Matthew Graham  :  "RTRS- ROSENGREN: LITTLE EVIDENCE OF SNAPBACK FROM Q1 ECONOMIC WEAKNESS"
Matthew Graham  :  "RTRS - FED'S ROSENGREN: CONDITIONS FOR FED RATE HIKE NOT YET MET"
Matthew Graham  :  "RTRS- US APRIL YEAR-OVER YEAR PCE PRICE INDEX +0.1 PCT VS MARCH +0.3 PCT (PREV +0.3 PCT); CORE +1.2 PCT VS MARCH +1.3 PCT (PREV +1.3 PCT)"
Matthew Graham  :  "RTRS- US APRIL PERSONAL INCOME +0.4 PCT (CONS +0.3 PCT) VS MARCH UNCHANGED (PREV UNCHANGED)"
Matthew Graham  :  "RTRS- US APRIL PERSONAL SPENDING UNCHANGED (CONSENSUS +0.2 PCT) VS MARCH +0.5 PCT (PREV +0.4 PCT)"