MBS Live: MBS Afternoon Market Summary
Hitting all time highs in production MBS never felt so uneventful...  In fact, it almost felt like the all time high in Fannie 3.5's at 104-05 was the known target for resistance from the start.  In the charts below from the MBS Live Dashboard, note how MBS had basically hit their highs and engaged in "Operation: Go Sideways" by 9am.  In fact, 9am prices = current prices.  In contrast, note that 10yr yields were still over 1.90 at the same time and not nearly done rallying.  MBS fizzled out early, and it could have more than a little to do with the lack of liquidity in 3.0 coupons.  

 

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
104-01 : +0-04
FNMA 4.0
106-00 : +0-03
FNMA 4.5
107-10 : +0-02
FNMA 5.0
108-28 : +0-02
GNMA 3.5
105-18 : +0-03
GNMA 4.0
108-16 : +0-03
GNMA 4.5
109-18 : +0-01
GNMA 5.0
110-31 : +0-01
FHLMC 3.5
103-27 : +0-04
FHLMC 4.0
105-23 : +0-03
FHLMC 4.5
106-26 : +0-02
FHLMC 5.0
108-08 : +0-01
Pricing as of 4:07 PM EST
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.
3:34PM  :  MBS Coasting Out Just Under All Time Highs
We've been surprised and continue to be surprised at just how little there has been to say about today's post-NFP trading. Everything happened in an eerily logical fashion...

The headline was moderately weaker-than-expected and as one would expect, bond markets rallied moderately. As would be expected, the rally in MBS is somewhat subdued due to nearness to all-time highs.

Ultimately, the day in bond markets will end up looking like a fairly logical extension of a very narrow, very gently sloped, bullish trend. It pushes MBS yields to their widest spreads vs Treasuries since early February. The ball is in their court now (or soon will be) to either continue widening or ramp up 3.0 production if we continue to operate at these levels next week.

There's been no volatility to speak of in the afternoon. 10yr yields coasted out hovering around 1.88. Fannie 3.5's are up 5 ticks at 104-02, and stocks have been sideways after losing about 20 pts (S&P).
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.
Jason Nugent  :  "REPRICE: 3:28 PM - Chase Better"
Matthew Graham  :  "RTRS - POLL - 11 OF 14 DEALERS SEE FED BEGINNING ASSET SALES, BALANCE SHEET REDUCTION, AFTER 2014; 3 SEE SALES STARTING IN 2014"
Matthew Graham  :  "RTRS- POLL - 7 OF 14 DEALERS SEE FED'S FIRST INTEREST RATE INCREASE IN SECOND HALF 2014, 5 SEE HIKE BEFORE THAT, 2 AFTER "
Matthew Graham  :  " - REUTERS POLL-MEDIAN OF FORECASTS FROM 14 PRIMARY DEALERS SEES 32 PCT CHANCE OF FED EVENTUALLY ANNOUNCING QE3"
Matthew Graham  :  "indeed 'twas Ira. http://www.mortgagenewsdaily.com/channels/secondary_markets/05022012-3-0-liquidity.aspx"
Ira Selwin  :  "Twas a good post the other day in regards to the 3 coupon and lack of liquidity"
Jason Wilborn  :  "3.0 should be the PAR coupon right now :)"
Jason Wilborn  :  "104-01"
Brent Borcherding  :  "A lot of good things go bad when values drop by 40%"
Matt Hodges  :  "yes, if its not a new primary"
John Rodgers  :  "Can a person use reverse mortgage payment as income to buy a new home?"
Matthew Graham  :  "unless you're a very compelling educator"
Matthew Graham  :  "ultimately, if you don't give the client what they want, you go broke"
Victor Burek  :  "exactly"
Matthew Graham  :  "sell the product your clients want but do your best to educate on what you think the right product is for them."
Matt Hodges  :  "so, pay options were not the "right" product?"
Victor Burek  :  "you are right mg...the ppp gave the client a better loan"
Thomas Nelson  :  "sell the right product is all I am saying."
Matthew Graham  :  "maybe my borrowers were just stupid or crazy though."
Matthew Graham  :  "on loans with an option for PPP or no PPP, most of my borrowers, given the choice, opted for the PPP because they "KNEW" they wouldn't need to sell or refi within that time frame and preferred the lower rate/fee"
Matt Hodges  :  "I will defend my brothers who sold them"
Thomas Nelson  :  "BVG, it's a discussion based on the article."
Matt Hodges  :  "And, what is wrong with "rights"?"
BVG  :  "what's the point at this point?"
Matt Hodges  :  "i'm sorry, i disagree with you, TN. you are lumping anyone in that sold the product as somehow bad. "
Victor Burek  :  "if i am remembering correctly, the ppp also gave client a better margin"
Thomas Nelson  :  "Matt, please don't start with the "rights".....of course you have the "Right"....but do the right thing and don't give a prepayment penalty to make more cash. Just like you said earlier today about your rule about not ordering appraisal until inspection.....have a rule about doing what is best for customer in the product presented."
Matt Hodges  :  "and, i never sold one. But, i'll defend the right to sell them by those who did"
Matt Hodges  :  "they were a good product, IF used properly and disclosed"
Jason York  :  "80/20 rules applies here"
Ira Selwin  :  "Im sorry, but you cant blame everyone for something some did. Thats what everyone is doign with our entire industry"
Victor Burek  :  "some IOs had prepays..and you could do a option arm wiht no prepay but most were done with"
Thomas Nelson  :  "Same with the interest only products victor.....but no prepay penalty to trap them form refinancing"
Thomas Nelson  :  "Yes, they shouldn't have signed it Aaron but the 5/IO's were a much better product that don't have prepay penalties. The only thing missing was the neg am payment.....and the ysp."
Victor Burek  :  "but the current rate for clients with option arms is around 3% or less"
Victor Burek  :  "pay option arms are basically the same as cashouts..you increase the loan balance, cashouts did it overnight, option arms over time"
Matthew Graham  :  "same principle at work"
Matthew Graham  :  "IMO, not much different than many 3/1 5/1 IOs"
Aaron Buyside Meyer  :  "Then the borrower shouldn't have signed right TN? Everyone has choices"
Matthew Graham  :  "I think the point was they were not "new products""
Thomas Nelson  :  "scratch that.....the pay-option arms were the devil for 90% of the borrowers who took them. Yes, they have their place for the investor at LOW LTV's who wantst to do other things with their money.....but that was not who took these loans. The fact that many had prepayment penalties disgusted me."
Thomas Nelson  :  "The bubble theory is 100% correct."
Matthew Graham  :  "main point is "it took a village," and I'm glad someone finally tackled it in a scholarly paper."
Thomas Nelson  :  "One thing I wish they would mention regarding brokers is that if we CAN get the loan for the customer and don't.....we could get sued. The guidelines are set for us, not by us."
Thomas Nelson  :  "Great Article MG...........Supports my theory that 99% of the foreclosures do not happen if home prices kept going up............Simply because, no matter how potentially clueless the customer was about a certain type of loan, no matter if they lose their job, no matter how over their head they got..............you could always SELL the house, unless the value went down."
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