MBS Live: MBS Morning Market Summary
Fundamentally, little has changed over the weekend or this morning as markets continue flying holding patterns, waiting for any information that informs the Greece situation. 10yr yields are as low as they've been since late September 2011 and Fannie 3.5 MBS are at all-time highs. But while the strong levels in Treasuries represent incremental improvements from last week's trading, the highs in MBS are the same highs seen on 3 of the 5 trading sessions last week. Production MBS are continually pushed into this ceiling around 104-10 in Fannie 3.5's, and further pushing is just making a stickier mess as opposed to some glorious breakout journey higher. That said, we don't and can't rule out some minor trickling higher from here. At some point--and we must be getting close--MBS will have to capitulate to some extent and explore the next few ticks higher as well as the next few drops of liquidity in the 3.0 coupon bucket.
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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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.
10:24AM :
ALERT ISSUED:
Markets Increasingly Bending Ears To Familiar European Tunes
Bond markets continue to trade in much stronger territory this morning as speculations about a Greek Euro-zone exit are quickly spiraling toward inevitability. To put things in perspective, German Bunds, this morning, crushed previous record lows of 1.492, falling to the low 1.43's. US Treasuries are merely a wing-man on that mission to soak up as much of that 'overflow' fight-to-safety bid as they can. Consequently, 10yr yields trade in the 1.77's currently, having been well below 1.80 all morning.
If Treasuries are one degree of separation removed from German Bunds, MBS are another degree of separation from Treasuries. In other words, prices are 8 ticks higher to 104-09 in Fannie 3.5's. Yield vs yield, however, that's only about 3 bps or so for Fannie current coupons vs 7 bps for Treasuries.
MBS underperforming into a flight-to-safety rally is not a new phenomenon, but the extent of recent underperformance is exacerbated by our nearness to all-time highs. A current levels, we're basically exhausting every last bit of capability for rate sheets to price in MBS gains. Without a more developed market for 3.0 coupons, MBS prices will continue to have limited room to run and rate sheets will continue to have less room to improve than they otherwise might in a perfectly liquid market.
Whatever the case, the morning's trading so far confirms that our focus is well-placed on Greece and Europe. This is a double edged sword in a sense. On the one hand, it's always good to know what's moving markets in considering the potential impact of upcoming events. On the other hand, it suggests that the underlying cause for rally isn't something that fosters long term stability or short-term predictability. The latter creates a lot of hesitation in the process of unscrewing the lid from the jar of Fannie 3.0 coupons.
There's nothing else of importance on the calendar of scheduled events today, though there is scheduled Fed Twist buying going on now in the 6-8 year sector. 1.77% has been resistance so far in 10yr yields and 104-09 thus far in Fannie 3.5's. 104-10 was the previous all-time high on 5/9.
If Treasuries are one degree of separation removed from German Bunds, MBS are another degree of separation from Treasuries. In other words, prices are 8 ticks higher to 104-09 in Fannie 3.5's. Yield vs yield, however, that's only about 3 bps or so for Fannie current coupons vs 7 bps for Treasuries.
MBS underperforming into a flight-to-safety rally is not a new phenomenon, but the extent of recent underperformance is exacerbated by our nearness to all-time highs. A current levels, we're basically exhausting every last bit of capability for rate sheets to price in MBS gains. Without a more developed market for 3.0 coupons, MBS prices will continue to have limited room to run and rate sheets will continue to have less room to improve than they otherwise might in a perfectly liquid market.
Whatever the case, the morning's trading so far confirms that our focus is well-placed on Greece and Europe. This is a double edged sword in a sense. On the one hand, it's always good to know what's moving markets in considering the potential impact of upcoming events. On the other hand, it suggests that the underlying cause for rally isn't something that fosters long term stability or short-term predictability. The latter creates a lot of hesitation in the process of unscrewing the lid from the jar of Fannie 3.0 coupons.
There's nothing else of importance on the calendar of scheduled events today, though there is scheduled Fed Twist buying going on now in the 6-8 year sector. 1.77% has been resistance so far in 10yr yields and 104-09 thus far in Fannie 3.5's. 104-10 was the previous all-time high on 5/9.
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.
Daniel Kramer : "today's pricing is amazing at wells, was just able to "return to float" at current market pricing a loan i locked on 4/30/12. pricing has improved at the rate of 4% for 45 days by 103bps in 14 days. wow, that is a big move"
Brent Borcherding : "On correspondent do they have the same 10% of Loan balance, in cash/liquid reserve, requirements? Wholesale, reserves can't come from retirement accounts."
Sung Kim : "what's interesting is that they also provide .25% rate improvement if borrower sets up an account with auto pay"
Sung Kim : "on another note, anyone been watching WF non-conf pricing? .75 price improvement on purchase... relatively smoking now"
Matt Hodges : "i did notice in the last week, GMAC put out MUCH better pricing"
Matthew Graham : "I want to say I remember noting several instances of some lenders' pricing getting aggressive before they exited. I don't have anything quantitative on that topic, just sort of a gut feeling."
Sung Kim : "i still dont get why they left gov't"
Ira Selwin : "They were pushing the Conv business"
Ira Selwin : "I'm not even saying they *want* to leave. They may have to"
Sung Kim : "doesnt seem like a company that wants to leave corr. unless their AEs are just trying to get paid before they fold"
Sung Kim : "Ira - my rate sheets are showing GMAC really agressive in with conforming pricing now"
Clayton Sandy : "Chip, 6 payments. "
Matt Hodges : "that sums it up well"
Ira Selwin : "They seemed to understand the hesitation in sending them business, but were still pushing what they could. "
Chip Harris : "Is it a 6 month wait time between VA IRRRLs?"
Ira Selwin : "We just met with them last week at the conference. Will be interesting to see."
Matt Hodges : "IRA - RTRS story indicated emphasis on auto lending, so I imagine not long"
Ira Selwin : "Yeh, how long does gmac corresp actually stay around"
Matt Hodges : "I lose my one option for Conv 90 day flips"
Matt Hodges : "it'll help the political blame game"
Gaius Rossini : "Ally bankruptcy mean anything for anyone?"
Christopher Stevens : "GM all...looks like pricing may be a little better again today."
Jeff Anderson : "1.7877. Holy smokes. Happy Monday, all."
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