MBS MID-DAY: Holding Moderate Losses Ahead of 10yr Auction

By: Matthew Graham

Domestic bond markets continue to be more-or-less glued to stocks.  Treasuries began flat in the overnight session, but yields soon began rising as equities began rising.  German Bunds followed the move as well, but even when they broke from the pack to rally back to unchanged levels in the early hours of the morning, Treasuries were more keen to follow equities.

Things looked fairly bleak heading into 10:30am.  10yr yields had moved as high as 2.086, breaking the 2.077 technical ceiling from the overnight session (yes, this 0.9 bps gap is splitting hairs in the bigger picture).  MBS were emulating the selling-spree, but in their characteristically junior-varsity way (i.e. smaller versions of the same moves seen in Treasuries).  In any event, Fannie 3.0s were just entering levels that would be consistent with negative reprice risk at the time.

Shortly before the oil inventory data came out, bonds found their footing.  From there, it's unclear whether the ensuing slide in oil prices was merely joining a bond rally already in progress or if it added to the resilience.  With the 10yr auction coming up at 1pm and a healthy dose of corporate bond issuance on tap, a case could be made for bonds being weaker were it not for the big drop in stocks and oil prices over the past hour.  We'll re-assess after the auction.


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
101-17 : -0-06
FNMA 3.5
104-14 : -0-05
FNMA 4.0
106-23 : -0-03
Treasuries
2 YR
0.6290 : +0.0200
10 YR
2.0670 : +0.0320
30 YR
2.8940 : +0.0220
Pricing as of 10/7/15 12:54PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:10AM  :  ALERT ISSUED: Bonds Crossing Technical Boundary With Stocks

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Jason York  :  "here is the release if anyone missed it: https://www.fanniemae.com/content/release_notes/du-do-release-notes-12122015.pdf"
Matt Hodges  :  "yes, its in the release notes, along with 1 year 1040s on s/e"
Scott Valins  :  "blended ratio JY?"
Jason York  :  "DU will allow non-occupant coborrowers and use their income as of 12/12 with the new 9.3 version"
John McClellan  :  "You can also do non occ coborrower with LP"
John McClellan  :  "most always...but need to run it...becareful with LP and disputes...more than one dispute will most likely give you an error on LP and won't give a decision (because of dispute)"
joon choi  :  "most of time 1yr"
Scott Valins  :  "almost always JL. Can't remember last time I didn't see 1 year for SE income"
Jason Lowe  :  "LP question.....we haven't had access until recently to LP. How standard is it that you get the one year tax return on SE borrowers? Im talking about on strong loans....740 FICO 80% or less LTV."
John McClellan  :  "that means down next time as a the "future" apps got pulled forward..IMO"
Oliver Orlicki  :  "Mortgage apps up 25%....trid"