Quiet Bond Market Leaves Focus on Demise of Adverse Market Fee

Seemingly out of the blue, the much-maligned adverse market fee for conventional refis was removed today.  Lenders acted quickly to adjust pricing for new locks with most going so far as to adjust existing locks depending on their nearness to the closing table.  This made for good drama and discussion on MBS Live, and it was an ideal day for such things considering a complete absence of volume and volatility in the bond market.  10yr yields ended with 1bp of unchanged and MBS underperformed slightly to end 2-3 ticks weaker (-0.06-0.09).  The underperformance could be as simple as investors making token adjustments for the impact on prepayment speeds from the removal of the adverse market fee (it's not a huge consideration, but it could bring more loans from this spring into the money for a refi).

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Retail Sales +0.6 vs -0.4 f'cast, -1.7 prev 

  • Consumer Sentiment 80.8 vs 86.5 f'cast, 85.5 prev

Market Movement Recap
08:55 AM

little-changed after stronger Retail Sales data.  10yr up 2.6bps at 1.327 (roughly unchanged since 8:30am) and 2.0 UMBS are down an eighth on the day.

12:37 PM

Calm day, erring on the side of strength.  MBS and TSYs both near best levels.  10yr almost green.  2.0 MBS still down 3 ticks (0.09).  

04:39 PM

Exceedingly gradual strength continues, just now taking 10yr yields into positive territory on the day (albeit barely).  UMBS have been essentially flat.