MBS RECAP: Bond Markets Mostly Put Their Foot Down

By: Matthew Graham

After two days of relatively brutal selling, bond markets finally opted for much less brutal selling.  In fact, 10yr yields were in positive territory as of the official 3pm ET closing time.  They've since trickled back to slightly higher yields, but even then, only by about 1bp.  MBS are in a similar boat with Fannie 3.0s down only 2 ticks and Fannie 3.5s down only 1 tick on the day.  None of that is too shabby considering the previous 2 days combined for a 17bp increase in 10yr yields and a half point drop in MBS.  Additionally, bonds were resilient in spite of a 47 point gain in the S&P.

Early movement came courtesy of stronger-than-expected GDP.  Bonds were at their weakest levels shortly thereafter, but found support there.  Trading was sideways into the afternoon, but improved markedly after the 7yr Treasury auction.  For instance, 10yr yields dropped from 2.204 to 2.166 in the 30 minutes following the auction.  MBS made a similarly perky move.  All this having been said, these are very small movements that stand as an epilogue to a story that's already been told. 


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
100-18 : -0-02
FNMA 3.5
103-23 : -0-01
FNMA 4.0
106-10 : +0-01
Treasuries
2 YR
0.7000 : +0.0200
10 YR
2.1910 : +0.0110
30 YR
2.9290 : -0.0060
Pricing as of 8/27/15 4:43PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:26PM  :  Bouncing Back Nicely After 7yr Auction; Reprice Risk Wanes
12:28PM  :  ALERT ISSUED: Negative Reprice Risk Increasing
9:12AM  :  Bond Markets Trying to Hold Support After Stronger GDP

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Sung Kim  :  "wow - this is a big deal http://mndne.ws/1PAQVFT"
Sung Kim  :  "therefore, max cash out would be 75% on NOO"
Sung Kim  :  " The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV/CLTV/HCLTV ratios for the cash-out transaction based on the current appraised value)."
Clay Schmeisser  :  "75% would be max cash out per FNMA if a cash out but if a delayed financing I believe it to be 80% LTV"
Clay Schmeisser  :  "refi question - conv delayed financing max LTV is 80% right?"
blarney27  :  "6 months...I thought early in the year I was getting approvals on deals like this (Cash out used to payoff debt). Looks like FHA is the home; thanks!"
John Tassios  :  "yep, gotta be over 760 and reserves may help, even then will be tough since it is a cash out and over 45 DTI"
Sung Kim  :  "that seems tough blarney"
blarney27  :  "Question: Has anyone had any luck lately with a cash out refi with LP (SFR, primary, 80% LTV) where the DTI is between 45-50% (backend) and the FICO score is between 700-720?"
Matthew Graham  :  "B+"
Matthew Graham  :  "RTRS- U.S. 7-YEAR NOTES BID-TO-COVER RATIO 2.53, NON-COMP BIDS $14.61 MLN"
Matthew Graham  :  "RTRS- U.S. SELLS $29 BLN 7-YEAR NOTES AT HIGH YIELD 1.930 PCT, AWARDS 72.84 PCT OF BIDS AT HIGH"
Matthew Graham  :  "7yr Auction coming up. Recent average bid-to-cover has been fairly steady in the 2.4's. 3 out of the last 4 auctions have come in at lower-than-expected yields, but the last one was higher (it was also the day after the Fed meeting). The current yield expectation is 1.934. For explanations of this terminology and more: http://mndne.ws/1gIJmzh"