MBS RECAP: Bonds Weaken Steadily, but Stay Inside Range

By: Matthew Graham •

At 9am, domestic bond markets were just barely clawing their way into positive territory after an uneventful overnight trading session.  That made for low yields of 2.206% in 10yr Treasuries--very much in line with the low end of the sideways trading range that we've been tracking ahead of next week's likely Fed rate hike.

After hitting those lows, yields rose ever-so-slightly and very steadily throughout the day.  MBS prices lost JUST enough ground for several lenders to put out negative reprices.  The fact that at least as many lenders are still on the day's original rate sheets speaks to the equivocal level of bond weakness.  For many, if the range isn't being meaningfully broken, nothing interesting is happening.

Almost as if by design, 10yr yields topped out at 2.239.  While there's no rule that says our upper range boundary of 2.24 is a hard and fast line in the sand, bouncing this close only reinforces the range-bound reality.  Maybe tomorrow morning's Retail Sales data changes that.  Maybe it doesn't.  It would have to speak very loudly and cause a fairly big break of the range to get much attention with the Fed on tap 3 business days later.

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
99-30 : -0-05
FNMA 3.5
103-04 : -0-05
FNMA 4.0
105-25 : -0-04
Treasuries
2 YR
0.9470 : +0.0240
10 YR
2.2340 : +0.0230
30 YR
2.9710 : +0.0070
Pricing as of 12/10/15 5:45PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:56PM  :  ALERT ISSUED: Negative Reprices Increasingly Likely
10:45AM  :  ALERT ISSUED: On the Edge of Negative Reprice Risk For a Few Lenders
10:30AM  :  Bonds Paying Attention to Oil, But Restrained by Auction
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Timothy Baron  :  "I also noticed that loans from family members now have to be secured by the subject property. It used to be okay completely unsecured. I did one of those last year."
Curt Sandfort  :  "TB, I thought the 4155 specifically acknowledged secured borrowed funds, but I read the collateralized loans to be of the nature like a 401k loan or a stock loan. more concerned about counting the payment, etc... but I see nothing about secured auto loans"
Patrick McCarroll  :  "A car would be considered "personal" property and not "real" property"
Curt Sandfort  :  "they borrowed against an auto"
Timothy Baron  :  "Cant be like a credit card cash advance, but there are other acceptable sources."
Timothy Baron  :  "That's clearly incorrect."
Curt Sandfort  :  "uw just called one of my LO's and said that no debts could be incurred for the minimum down payment"
Patrick McCarroll  :  "(1) Collateralized Loans (TOTAL) (a) Definition A Collateralized Loan is a loan that is fully secured by a financial asset of the Borrower, such as deposit accounts, certificates of deposit, investment accounts, or Real Property. These assets may include stocks, bonds, and real estate other than the Property being purchased"
Curt Sandfort  :  "secured borrowed funds are no longer good on FHA?"
Matthew Graham  :  "No, no drama today. Bund yields and Euros both moved lower."
John Tassios  :  "today, after this was announced, any bund weakness today so far. I don't have much faith in ECB completing it's stated QE goals, and am nervous of a big selloff in EU bonds at some point that would spill over here in longer dated TSY's."