MBS Live: MBS Afternoon Market Summary
Bond markets continued the process of leveling off after hitting their strongest levels on 5/17. For MBS, those were all time highs, and for Treasuries, very close to historical lows (1.69 vs 1.67 previous 'modern economic history' low). We see pivot points for 10yr yields at 1.75, give or take a bp, and Fannie 3.5 MBS within a few ticks of 104-10. So today's weakness gets us generally back to those levels. In the big picture, the moves are consistent with the periodic profit-taking pauses seen during long term rallies. If, however, they cross back over the aforementioned pivot points with volume and momentum, we'd have to begin assessing whether or not the prevailing trend is shifting from 'rallying' to 'sideways.'
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.
3:05PM :
ALERT ISSUED:
MBS Incrementally Weaker In The Afternoon, Slightly More Reprice Risk
If you look at the chart of Fannie 4.0's vs Fannie 3.5's, you'll see the general problem plaguing production coupons at the moment (i.e. 4.0's have been fairly flat while 3.5's have been slightly weaker). We're dealing with the twofold problem of late-day illiqudity as well as some re-allocation between 3.5's and 4.0's.
3.5's have been rampantly increasing in popularity vs 4.0's, and today sees a bit of 'unwinding' of that phenomenon. Add to it the fact that buyers (particularly the Fed) was waving em in this morning, but that the afternoon belongs to sellers and you have the recipe for what's on the screens currently. Liquidity is crap, too. Some lenders may see the current weakness as justification to reprice negatively, but in the slightly bigger picture, we're still just leveling off from a month-long rally. "Strategic" vs "tactical" considerations when it comes to locking. Tactically, risks are at their highest levels of the day, but strategically, nothing's really changed.
3.5's have been rampantly increasing in popularity vs 4.0's, and today sees a bit of 'unwinding' of that phenomenon. Add to it the fact that buyers (particularly the Fed) was waving em in this morning, but that the afternoon belongs to sellers and you have the recipe for what's on the screens currently. Liquidity is crap, too. Some lenders may see the current weakness as justification to reprice negatively, but in the slightly bigger picture, we're still just leveling off from a month-long rally. "Strategic" vs "tactical" considerations when it comes to locking. Tactically, risks are at their highest levels of the day, but strategically, nothing's really changed.
12:35PM :
ALERT ISSUED:
MBS Hit Lows Of The Day. Negative Reprice Risk Slightly Increased
Fannie 3.5's are currently down 1 tick on the day at 104-13. While this isn't appreciably far from price levels earlier this morning when rate sheets were coming out, it stands out as enough of a downtick on the charts that we can't rule out a negative reprice by one or two of the "early crowd" lenders.
The major caveat here is the narrowness of the range and the corresponding cues from Treasuries. We haven't yet seen anything too disturbing on either front. We'd want to see Fannie 3.5's break below 104-13 and 10yr yields above 1.74 before getting more legitimately concerned about reprices. So, small risks for now, but not altogether unmanageable if you know your lender.
The major caveat here is the narrowness of the range and the corresponding cues from Treasuries. We haven't yet seen anything too disturbing on either front. We'd want to see Fannie 3.5's break below 104-13 and 10yr yields above 1.74 before getting more legitimately concerned about reprices. So, small risks for now, but not altogether unmanageable if you know your lender.
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.
Michael Tadros : "REPRICE: 3:42 PM - Interbank Worse"
Matthew Graham : "has a couple desirable ingredients for pivot points such as high volume on approaches/breaks, and lots of RECENT activity both as a resistance and support level, as well has a more remote day of historical significance (10/3/11 low of 1.747 in high volume)"
Matthew Graham : "I think the bigger-picture line in the sand you're looking for CS is the pivot point in the zone around 1.75 in 10yr yields"
Matthew Graham : "ultimately, I wouldn't likely let super low volume, illiquid Monday trading conditions affect my level of "worrying about further losses," and even then would be more likely made to worry based on what broader rates markets were doing and not necessarily MBS itself. "
Jeff Anderson : "I prefer 104-10."
Matthew Graham : "support levels are 104-10, 104-04, 104-00"
Christopher Stevens : "MG- at what level would we like to see a bounce on the 3.5 before we worry about further losses"
Chip Harris : "we'll see if they can do that, just completely makes no sense."
Justin Dudek : "have them bring in the monthly payment"
Chip Harris : "anyone care to hear about the most asanine thing ever? I have a Freddie Open access with a 2nd. Guaranty Bank, then 2nd lienholder won't allow over a 1% increase in loan amount, so we had to lower the loan amount. Appraisal came in well, and those two combined pushed us below 80% (78.5%). Now the cap LLPA goes from .5 to 1.75 so they don't have enough room to cover the costs. They would have to bring in about $2000 and they don't have it. So, lowering a loan amount and LTV / CLTV kills a d"
Steven Stone : "wells added 31791"
Steven Stone : "43"
Steven Stone : "lol yeah did you look at how many govt loans they added to their servicing portfolio last month? (Per hud neightborhood watch)"
Matthew Graham : "RTRS - MOYNIHAN: BANK IS NARROWING SCOPE OF COMPANY, WHICH WILL ADDRESS TOO BIG TO MANAGE QUESTIONS "
Matthew Graham : "RTRS- MOYNIHAN: MORTGAGE SERVICING COSTS ARE PEAKING AS DELINQUENCIES COME DOWN "
Matthew Graham : "BofA's Moynihan at Investor conference: RTRS-- MOYNIHAN: MORTGAGE VOLUME IS UP IN THE SECOND QUARTER "
Robin Baran : "We have been give the go-ahead to originate and process fha streamlines with the new criteria. Case numbers will be pulled after 6-11. No verbiage thru FHA that says applications have to be after 6-11, only case numbers. "
Matt Hodges : "and page 3"
Matt Hodges : "page 2 of ML 12-4, AP"
Kiko330 : "Not going to happen, sorry.. Wrong name wrong person."
Matt Hodges : "not sure, can't pull case number prior though"
Scott Valins : "so really need to find a way to use it. Any chance lender takes it since the bureaus reported to the correct name?"
Andy Pada : "MH, can you originate the loan prior to 6/11"
Scott Valins : "damn. re-ran it and score dropped"
Matt Hodges : "6/11"
Scott Valins : "really? they just told me they can fix it but it won't work when re-issued"
Andy Pada : "Not an FHA guy so can someone advise as to when the new streamline FHA premiums come into effect?"
Jason York : "you should be able to call into your credit reporting agency and have them fix it, then reissue it, and still be able to use the same report, they used to not be able to do that, at least this is how it works with Kroll"
Scott Valins : "has anyone ever been able to use a credit report where last name is spelled slightly wrong but the 3 bureaus pulled it correctly?"
Kiko330 : "Hudson City has no limit, but max 3 by them"
Tom Schwab : "I believe NYCB has the Fannie 5 to 10 also"
B-C : "Also Wintrust"
B-C : "M & T and 5th 3rd"
Adam Dahill : "who else allows more than 4 these days? I was using Citi and the only other I know is flagstar"
Ken Crute : "most investors 4- some investors with additonal requirments 10 "
Caroline Roy : "that's waht i was thinking. quite the range eh?"
Matt Hodges : "4 or 10"
Caroline Roy : "whats the normal number of max properties financed?"
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