MBS Live: MBS Morning Market Summary
Sorry to be getting the recap out to you later than normal, but updates and alerts for the MBS Live community are first and foremost, and on days like today, there were a lot to do (some are in the list below, and the rest will show up in tonight's RECAP). Reason being: we quickly found ourselves in the uncommon situation of negative reprice risk right out of the gate. It's about the worst possible situation for lenders as MBS flat to slightly improved after opening weaker. After the roll yesterday and overnight weakness, it would be hard not to expect a tepid morning bounce back to at least be able to go no lower. But no sooner were rate sheets out than markets started tanking. As I laid out in the Day Ahead, there was no fundamental data to go on, and tradeflows/technicals indeed took us right through the danger zone. MBS were down as low as 103-00!!! This now looks to be a failed breakout attempt from a true intraday inflection point at 103-05-ish. Same story with 1.90 in 10yr yields, which definitely got the highest number of "ceiling bounces" in rapid succession, gave way to 1.92's briefly, and has now been containing yields since Noon. To be clear, this is the "hope," more than it is a prediction. More than anything, these levels become lines in the sand... If they hold, it reinforces a sideways range. If they break, it reinforces a continuation of May's negative trends.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
|
|
|
||||||||||||
Pricing as of 11:09 AM EST |
Morning 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 morning.
11:00AM :
ALERT ISSUED:
Probably More Like "Not If, But When" For Reprices
Any lender that took down marks before 10:21am is already down 6 ticks. Earlier lenders are worse off. All those rate sheets are at risk of negative reprices.
Big nasty distribution sell-off following auctions, plus technical correction after crossing 1.84 in 10yr yields. Short term selling snowballs got big enough to bring longer term money in as a seller. Volume is out of control high. 10's are gonna crack our 1.90 target in a few seconds and MBS are down almost half a point. It's getting ugly.
Big nasty distribution sell-off following auctions, plus technical correction after crossing 1.84 in 10yr yields. Short term selling snowballs got big enough to bring longer term money in as a seller. Volume is out of control high. 10's are gonna crack our 1.90 target in a few seconds and MBS are down almost half a point. It's getting ugly.
10:20AM :
ALERT ISSUED:
Now More Like Fighting For Survival. Negative Reprice Risk Already
Just a quick heads-up by way of course correction to the previous update. Any attempts at "clawing back" are on hold and "fighting for survival" is a better characterization at this point. Bearish bets in Treasuries and MBS were waiting to see if Bernanke would have anything to say about monetary policy, but his speech instead focused on the shadow banking system. Then at 10am, the Philly Fed Survey of Professional Forecasters held few surprises an provided no reason for the would-be sellers to hold off any longer.
10's have ratcheted up to 1.862, their highest levels of the morning and look quite serious about attempting to break higher. MBS are at their lows of the morning at 103-14. There's already reprice risk out there, if a lender priced early.
10's have ratcheted up to 1.862, their highest levels of the morning and look quite serious about attempting to break higher. MBS are at their lows of the morning at 103-14. There's already reprice risk out there, if a lender priced early.
9:52AM :
Bond Markets Clawing Their Way Back After Big Overnight Losses
Last night was one of the roughest for US Treasuries in a long while. Japanese markets kicked off the drama for US debt as the Nikkei rose almost 3% and Japanese 10yr's rose over 70bps. The Yen cracked a 4yr old technical ceiling just over 100, and shot higher (weaker) from there. US 10's hit 1.872 2 hours after the European open, in much heavier volume than normal, and while breaking through the important 1.84% area.
While Treasuries have managed to correct from overnight highs leading into the domestic session, it continues to be a bumpy ride. We only made it as low as 1.838 at the 9am hour and are currently running the risk of "pivoting" higher over the long term inflection zone (roughly 1.83-1.84). If we don't move any lower than that today, the situation would be increasingly bearish, further confirming May's post-NFP bounce back into 2013 trend areas.
For their part MBS opened lower--partly due to overnight weakness and partly due to last night's roll. Factoring out the roll, we were down 6 ticks from yesterday, and are back there again now. In the intervening time, we lost ground right out of the gate, but started to stabilize after 8:20am. Things were fairly flat until the stock market opening bell, and have gotten choppier from there. 10's made another attempt at 1.84 and bounced higher right at 9:30 (currently at 1.851).
Volume is brisk and markets are certainly asking us to believe that risks are high for a continued sell-off. As often as not, that's a bluff, but this one looks like it should be taken seriously for now.
While Treasuries have managed to correct from overnight highs leading into the domestic session, it continues to be a bumpy ride. We only made it as low as 1.838 at the 9am hour and are currently running the risk of "pivoting" higher over the long term inflection zone (roughly 1.83-1.84). If we don't move any lower than that today, the situation would be increasingly bearish, further confirming May's post-NFP bounce back into 2013 trend areas.
For their part MBS opened lower--partly due to overnight weakness and partly due to last night's roll. Factoring out the roll, we were down 6 ticks from yesterday, and are back there again now. In the intervening time, we lost ground right out of the gate, but started to stabilize after 8:20am. Things were fairly flat until the stock market opening bell, and have gotten choppier from there. 10's made another attempt at 1.84 and bounced higher right at 9:30 (currently at 1.851).
Volume is brisk and markets are certainly asking us to believe that risks are high for a continued sell-off. As often as not, that's a bluff, but this one looks like it should be taken seriously for now.
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.
Nate Miller : "no doubt...that's why I moved my float-boat over to dry storage, can't take the stress. I lock everything upfront and move on to the next one. "
Oliver S. Orlicki : "first time in a long time"
Oliver S. Orlicki : "me too TR"
Ted Rood : "Glad I'm 100% locked!"
Oliver S. Orlicki : "snowballing in may"
Oliver S. Orlicki : "brutal last 7 days! We were on the verge of 1.6....wow!"
Daniel Kramer : "there goes by 3.375% no closing cost floaters"
Daniel Kramer : "the sky is falling the sky is falling"
Gus Floropoulos : "how quickly things change"
Christopher Stevens : "never a good day when the line on MBS is going off the screen to the south and the 10yr going off the screen to the north"
Christopher Stevens : "shadow banking system... http://www.investopedia.com/terms/s/shadow-banking-system.asp"
Andy Pada : "what exactly is the shadow banking system? are we the shadow banking system?"
Jason Anker : "I've seen PUD attached LLPAs but not PUD detached LLPAs. Investor sensative, FNMA has no opinion"
Jason Anker : "PUDs are very geographical. There are maybe 2 of them in MA but we have lots of subdivisions"
Ted Rood : "Anything with covenants is a PUD"
Ken Crute : "https://www.fanniemae.com/content/pricing/llpa-matrix.pdf
"
Ken Crute : "never seen on on a PUD before, most homes in a subdvision are considered a PUD "
Scott Lushing : "Not hit but check investor overlays"
Christopher Max : "So does a PUD not have that then? I do not usually run into PUDS."
Ken Crute : "its on a condo "
Christopher Max : "Is there a .75% LLPA for PUD above 75% LTV on a 30 year Fannie Mae loan? "
Matthew Graham : "RTRS- BERNANKE SAYS FED IS WATCHING FOR SIGNS OF EXCESSIVE RISK TAKING IN ASSET MARKETS "
Matthew Graham : "RTRS- BERNANKE SAYS RISK OF A RUN ON MONEY MARKET FUNDS REMAINS "
Matthew Graham : "RTRS - FED'S BERNANKE SAYS THERE ARE REMAINING VULNERABILITIES IN THE SHADOW BANKING SECTOR "
Andrew Horowitz : "great charts BTW"
Andrew Horowitz : "qE has done its job, it has driven investors into "more risky" investments"
Matthew Graham : "yes AH, I think that's definitely a part of it. Probably the biggest part."
Christopher Stevens : "I do tthink QE has caused an inverse relationship between S&P and 10YR. If yields start moving up the S&P is bound to come down (imo). If we think S&P going up due to QE and its effect on corporate profits then higher rates will certainly cause lower profits due to higher cost of borrowing and financing expenditures."
Andrew Horowitz : "MG the separation can be attributed to QE though"
Matthew Graham : "someone should be pointing these things out. I guess the last time I thought about it, I only considerate enough to take the trendline chart back to the 1990. http://www.mortgagenewsdaily.com/mortgage_rates/blog/306469.aspx I won't fail you again!"
John Rodgers : "Okay, now you've peaked my interest. I like the 25 year trend line. :)"
Matthew Graham : "Sounds good. Here's one for the road: http://screencast.com/t/yfpNlFfydCw "
Matthew Graham : "I guess I'm not seein' that one JR. Are you saying "the lines drifted apart and will come back together?" maybe because of QE tapering or some such thing? The main point of the chart was to advocate not drawing any conclusions about long term correlation, despite intraday stock lever "
John Rodgers : "Actually MG, according to your chart one could deduct that. "
Jeff Anderson : "GM, all. So I was at the gas station yesterday and heard a couple of older guys talking about the stock market and thinking they should put some money in, etc, etc. I'm guessing with more and more people looking to get in after another push up, the correction in equities arrives."
Christopher Stevens : "so a 5-10% correction in the S&P could bring 10YR right around 2.06"
Matthew Graham : "very important: http://screencast.com/t/qPCv20aWXe"
Matthew Graham : "I think it's important to consciously disconnect previously held notions about how stocks and bonds move together. Very very important."
Jason Anker : "when equities correct and they must will bonds?"
Brett Boyke : "Bonds finally affirming the equity move, better get out and court purchase business before it's too late"
Christopher Stevens : "MG- with lack of economic data in the near term it seems technical trading will be at the forefront. And it sure does seem like traders want to test higher yields and higher equities"
Matthew Graham : "Retail Sales on Monday... Hopefully that doesn't foil any over-the-weekend hopes for a bounce back. Just stay safe."
John Tassios : "With the auctions behind the market this week / hopefully there will be some consolidation and rates will stabilize and hopefully some buying next week / Bonds are at more attractive levels now than they were 1 1/2 weeks ago for investors"
Michael Owens : "looks like a lock before 8:30 day to me to get yesterdays pricing."
Oliver S. Orlicki : "like mg said, it usually defines the trend for the month and in this case it is 100% true"
Oliver S. Orlicki : "that nfp beat is killing us"
Oliver S. Orlicki : "1.85? What happened?"
Read what our user's have to say about MBS Live on LinkedIn.
» Start a two week free trial of MBS Live.