MBS Live: MBS Afternoon Market Summary
Today's rally was interesting. At first, it was all about ADP's employment data this morning. The series has been increasingly correlated with the BLS version of Private Payrolls due out Friday, but not so much so that markets take it as gospel. The remaining morning data did nothing to question the bond market positivity, so good times kept rolling--fairly steadily until the noon hour. At that point, bond markets began to take a defensive stance--not in a bad way, but in the form of a rally--guarding against the possibility that the Fed would surprise us with something more bond bullish, leaving positions too short, even with more risk ahead tomorrow and the next day. After the statement came out almost perfectly similar to the previous version (it only added some gripes about fiscal policy and a reminder that they would either buy more or less TSYs/MBS depending on conditions), the defensiveness simply evaporated and we're left right where we were after ADP. That's still pretty darn good and rate sheets reflect that. As an aside, lower rates got a lot more love than higher rates today, primarily because the upper coupons felt the pain of a new FHFA Director appointee--one who might give borrowers in mortgages backing those higher coupons, more freedom to refi (or even reduce principal).
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
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Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.
2:58PM :
Holding Steady For Now, Environment Still Warrants Caution
Just a quick update following the moderate fall from the highs after FOMC...
We've been mostly holding steady at similar price levels as the last alert, but without a resoundingly positive bounce back to previous highs. In fact, we're close to testing a break below the morning's supportive levels mentioned in the last alert (right around 104-24, which is where we are currently)
If we can continue to hold current levels, we can probably avoid negative reprice risk for most any lender. In attempting to identify whether or not we're holding ground or not, the pivot point at 1.64 in 10yr yields acted as firm resistance yesterday and has been strong support post-FOMC. If that level sees a meaningful (more than .005%) in either direction, it would go a long way toward soothing or intensifying afternoon fears for MBS and rate sheets. We're at 1.6358 currently, but 1.6409 moments ago.
We've been mostly holding steady at similar price levels as the last alert, but without a resoundingly positive bounce back to previous highs. In fact, we're close to testing a break below the morning's supportive levels mentioned in the last alert (right around 104-24, which is where we are currently)
If we can continue to hold current levels, we can probably avoid negative reprice risk for most any lender. In attempting to identify whether or not we're holding ground or not, the pivot point at 1.64 in 10yr yields acted as firm resistance yesterday and has been strong support post-FOMC. If that level sees a meaningful (more than .005%) in either direction, it would go a long way toward soothing or intensifying afternoon fears for MBS and rate sheets. We're at 1.6358 currently, but 1.6409 moments ago.
2:14PM :
ALERT ISSUED:
Nothing New From Fed; MBS Lose Some Luster; Caution but Not Panic
While there was nothing negative for bond markets contained in the most recent FOMC Statement (see the difference HERE, neither was there anything incrementally positive either. The Fed only made two real changes to the statement, and both reinforced that which was already known: fiscal policy is a drag on the economy and the FOMC will either do more or less stimulus/easing depending on what's needed.
This runs the risk of being unsatisfying for bond markets who may have been expecting more acknowledgment of the recent slow-down and potential shift in QE tapering expectations. MBS are off 5 ticks from their highs at 104-25 in Fannie 3.0s.
This is a precarious position for reprice risk as some lenders may have yet to reprice for the better from morning gains, yet the quicker-to-react crowd--especially those who repriced near the highs--are already at some small risk of negative reprices. Bottom line, we'd be surprised to see the morning's supportive levels meaningfully challenged, but risk is always somewhat increased when we lose 5 quick ticks. Balance that against past experiences with the lender you're considering locking with.
This runs the risk of being unsatisfying for bond markets who may have been expecting more acknowledgment of the recent slow-down and potential shift in QE tapering expectations. MBS are off 5 ticks from their highs at 104-25 in Fannie 3.0s.
This is a precarious position for reprice risk as some lenders may have yet to reprice for the better from morning gains, yet the quicker-to-react crowd--especially those who repriced near the highs--are already at some small risk of negative reprices. Bottom line, we'd be surprised to see the morning's supportive levels meaningfully challenged, but risk is always somewhat increased when we lose 5 quick ticks. Balance that against past experiences with the lender you're considering locking with.
1:54PM :
Ahead Of Fed, Some Takeaways From The Previous Statement
- "return to moderate economic growth following a pause late last year"
- "Inflation has been running somewhat below the Committee's longer-run objective"
- "The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline"
- Continued $40 bln for TSYS and $45bln for MBS per month. Continued reinvesting monthly MBS inflows.
- Notable absence of timeline or threshold tied to asset purchases.
- Thresholds only mentioned with respect to "exceptionally low range" for the Fed funds rate.
- "The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability."
- "Inflation has been running somewhat below the Committee's longer-run objective"
- "The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline"
- Continued $40 bln for TSYS and $45bln for MBS per month. Continued reinvesting monthly MBS inflows.
- Notable absence of timeline or threshold tied to asset purchases.
- Thresholds only mentioned with respect to "exceptionally low range" for the Fed funds rate.
- "The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability."
12:45PM :
ALERT ISSUED:
Fresh Annual Highs For Bond Markets, Positive Reprice Potential
While most lenders tend to hold back a bit before an FOMC Announcement, MBS are currently up enough that we might see a few positive reprices in addition to the one already reported. Fannie 3.0s are up 10 ticks on the day to 104-28 and 10yr yields have fallen over 5bps to 1.6222. Stocks are forming a short term "triangle" resting on yesterday's lows and capped by yesterday morning's highs.
Again, we'll see fewer reprices than we'd normally see considering the gains, but we've shifted into a range where we may see some. Last note: the last 2 ticks of improvement in MBS are quite recent, so we'd need to hold here for a bit in order for reprices to be seen.
Again, we'll see fewer reprices than we'd normally see considering the gains, but we've shifted into a range where we may see some. Last note: the last 2 ticks of improvement in MBS are quite recent, so we'd need to hold here for a bit in order for reprices to be seen.
11:57AM :
NY Atty General: Obama Shouldn't Wait For Senate To Confirm FHFA Head
NEW YORK – Attorney General Eric T. Schneiderman today applauded President Obama for nominating Mel Watt as the permanent head of Federal Housing and Finance Agency (FHFA), the agency that oversees Fannie Mae and Freddie Mac, but called on him to take immediate action to replace acting FHFA Director Edward DeMarco with a new acting director who will allow principal relief for struggling homeowners.
“I applaud the President for finally moving to nominate a permanent head of the Federal Housing Finance Agency,” said Attorney General Schneiderman. “As I have consistently said, the FHFA’s refusal to allow principal write-downs that would result in more loan modifications is a direct impediment to our economic recovery and stands in way of our efforts to provide much needed assistance to homeowners in New York and across the country. This nomination is a good first step, but struggling homeowners cannot afford to wait for the Senate to complete the confirmation process. The President should use his legal authority to replace Edward DeMarco with a new acting director who will start the effort to put FHFA on the side of working families immediately.”
“I applaud the President for finally moving to nominate a permanent head of the Federal Housing Finance Agency,” said Attorney General Schneiderman. “As I have consistently said, the FHFA’s refusal to allow principal write-downs that would result in more loan modifications is a direct impediment to our economic recovery and stands in way of our efforts to provide much needed assistance to homeowners in New York and across the country. This nomination is a good first step, but struggling homeowners cannot afford to wait for the Senate to complete the confirmation process. The President should use his legal authority to replace Edward DeMarco with a new acting director who will start the effort to put FHFA on the side of working families immediately.”
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.
Eric Franson : "REPRICE: 3:04 PM - Wells Fargo Better"
Matthew Graham : "You got it OO. Thank you for being a part of the community"
Oliver S. Orlicki : "mg, once again, been with you for years and I cannot thank you for this amazing website. Pays for itself 1000 fold! "
Victor Burek : "Bloomberg said new language"
Andy Pada : "did I hear a "substantial improvement in labor market" criteria?"
Andrew Horowitz : "increase or decrease new verbiage MG?"
Ted Rood : "inflation not an issue"
Matthew Graham : "RTRS- FED SAYS VOTE IN FAVOR OF POLICY WAS 11-1; GEORGE DISSENTED OVER CONCERNS MONETARY ACCOMMODATION RISKED FUTURE IMBALANCES, COULD LIFT INFLATION EXPECTATIONS "
Matthew Graham : "RTRS- FED SAYS ANTICIPATES INFLATION OVER MEDIUM-TERM LIKELY WILL RUN AT OR BELOW ITS 2 PCT OBJECTIVE "
Matthew Graham : "RTRS- FED SAYS HOLDING INTEREST RATES IN ZERO-0.25 PCT RANGE UNTIL UNEMPLOYMENT HITS 6.5 PCT, PROVIDED EXPECTED INFLATION STAYS UNDER 2.5 PCT "
Matthew Graham : "RTRS- FED SAYS IS PREPARED TO INCREASE OR REDUCE PACE OF BOND PURCHASES TO MAINTAIN APPROPRIATE POLICY ACCOMMODATION "
Matthew Graham : "RTRS- FED REPEATS WILL BUY LONGER-TERM TREASURY SECURITIES AT PACE OF $45 BLN A MONTH, AGENCY MBS AT $40 BLN A MONTH"
Lynn ONeal : "REPRICE: 1:54 PM - Franklin American Better"
Tom Schwab : "REPRICE: 1:53 PM - AMC Better"
Dameon Everhart : "REPRICE: 1:52 PM - First Century Bank Better"
Scott Rieke : "REPRICE: 1:31 PM - Chase Better"
Jeff Anderson : "I hope he just tells it like it is. That should be good enough for us."
Christopher Stevens : "Hope Ben does not dissapoint "
Gus Floropoulos : "movement in mbs may be indicating that some 1 knows something b4 fed speaks....or light volume"
Jeff Anderson : "Exactly. Deja vu, all over again."
Scott Rieke : "the beauty of quasi-tech analysis - it's really just a guess based upon empirical data - past results do not guarantee future results. But they do rhyme."
Ted Rood : "so logically we should hit about 1.25 on 10 year soon!! ;)"
Scott Rieke : "this year we are just starting the cycle 40bps lower than 2012"
Scott Rieke : "Basically same story for 2011 and 2010 to an extend - though QE announcements played out"
Scott Rieke : "If you look at the timing, last year's grind to the lows started in mid-march, following the release of Q1 data - such as we have here. It's hope into the new year, then realization, then complacency into summer, finally sell-off in the end of Q3 and re-investment in Q4 as funds realize they are supposed to get something called ROI"
Matthew Graham : "1.61 was a while back, but I think I said 1.60 and 1.55 yesterday. 1.55 would be a challenge without NFP complying (significantly)."
Jeff Anderson : "1.62. Wow. What was a significant resistance level mentioned yesterday? Something in the 1.61's?"
Christopher Stevens : "I am thinking best case is best ex 3.375 and 3.250 with small price if Fed and NFP are in our favor. Banks just can't handle the business and they certainly are getting tired of taking out current mortgages with these lower rate refi's"
Christopher Stevens : "What will be interesting is if the 10YR drops how low investors will drop rates as it seems they are in a manage the pipeline mode. I am hearing Chase and Wells are having a hard time closing loans(retail side) in a timely fashion."
Rob Clark : "REPRICE: 11:55 AM - Provident Funding Better"
Scott Rieke : "How odd, no repricings yet today. "
Matthew Graham : "+0-07 is 7/32nds, and then I was going to say what Alan just said."
Alan Craft : "But if your lender priced after say about 9:30 EST, we are not up much at all"
Andy Pada : "Ka li, I will say that this live chart and the chat has been invaluable for me."
ka li : "when I see 0.07 in green I'm guessing there might be re-price for improvement..."
Ken Crute : "when it comes to float/lock. try to decide which conversation you would rather have with your client. Explaining why you did NOT lock, or Why you DID lock. of course it depends on where they are in pricing, lender credits and your comp plan etc... "
Ted Rood : "when market has already gone up as much, and as quickly, as it has, see limited room for immediate improvement. Think expectations for a less than stellar Fed report already reflected in current pricing."
Victor Burek : "be ready to lock around 2pm as the statement could cause a move..but I doubt it"
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