MBS RECAP: Super Flat; Mortgages Outperform Treasuries

By: Matthew Graham •

It was an exceptionally flat day for MBS with Fannie 3.5s holding between 103-24 and 103-27 for the entire session.  More than 90% of today's trades took place within half a tick of 103-26.  If there was a detectable bias, it was toward slightly stronger levels as the day progressed. 

The same couldn't be said for Treasuries, which generally weakened overnight and into the domestic session.  The major issue for Treasuries was corporate issuance.  That means that corporations announced new bond offerings.  These not only bring extra supply to bond markets, but the financial firms that conduct the sales often sell Treasuries as a part of the hedging process, thus making for a double whammy for Treasuries.  If it seems like I've been harping on this before, during, and after it happened, it's only because there hasn't been much else to discuss.

There were no significant economic reports today and the 3yr Treasury auction was totally vanilla.  Even then, 3yr auctions don't tend to have much impact on the MBS coupons that matter for rate sheets.  If there's a consolation in the bigger picture, it's that longer-term Treasury yields continued to hold their recent range, where 2.20 is a loose guideline for the ceiling. 

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
100-22 : -0-06
FNMA 3.5
103-28 : -0-04
FNMA 4.0
106-13 : -0-02
Treasuries
2 YR
0.7370 : +0.0280
10 YR
2.1860 : +0.0546
30 YR
2.9600 : +0.0678
Pricing as of 9/8/15 5:30PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:51AM  :  After Modest Drift Overnight, Bonds Hammered by Corporate Issuance Early
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Michael Baker  :  "You should not have nay issues closing that loan. "
Michael Baker  :  "Call HUD helpline (800-225-5342) as they will rescind an indemnification if it is pointed out the 30th day of a payment cycle landed on a Sunday. "
Michael Baker  :  "8/30 was a sunday, so payment would not have been processed, so no that should not be considered 30 days late"
Ted Rood  :  "Would you guys interpret an August payment posted on 8/31 as 30 days late?"
Matthew Graham  :  "RTRS- PRIMARY DEALERS TAKE 41.02 PCT OF U.S. 3-YEAR NOTES SALE, DIRECT 7.95 PCT AND INDIRECT 51.03 PCT"
Matthew Graham  :  "RTRS- U.S. 3-YEAR NOTES BID-TO-COVER RATIO 3.23, NON-COMP BIDS $39.78 MLN"
Matthew Graham  :  "RTRS- U.S. SELLS $24 BLN 3-YEAR NOTES AT HIGH YIELD 1.056 PCT, AWARDS 30.74 PCT OF BIDS AT HIGH"
Matthew Graham  :  "3yr Auction coming up at 1:01:30. Current yield expectation is 1.056. Almost all recent 3yr auctions have come in below expectations (average 0.0033%). Bid to cover has been around 3.3 and indirect bid % has been just over 50%. (if you need a primer on this jargon, here it is: http://mndne.ws/1gIJmzh)"