MBS Live: MBS Afternoon Market Summary
Following MBS is a tricky business. On the one hand, traders who are rooting for MBS, do so from a spread standpoint, where the ups and downs of outright prices don't matter as long as spreads are tightening (relative performance improving versus a benchmark like 10yr Treasuries or swaps). On the other hand, proponents of MBS in the loan origination world tend to like outright prices to move higher (or at least hold steady!) so that rate sheets see the benefits. Though it's of scarce comfort to that crowd, at least today's sell-off was a different breed than the one we've recently seen (where MBS not only lose ground in price, but also underperform benchmarks). Of course, we still lost lots of ground in price--taking MBS back to their lowest levels from the pre-NFP range. But had MBS kept pace with Treasuries compared to yesterday, Fannie 3.5s would be well into the 102's right now. So we got that goin' for us which is--well... It's something anyway. If you missed it earlier, here are my thoughts on NFP's implications on Fed policy: Payrolls Report Changes Nothing About Fed's Next Move.
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.
2:50PM :
Plosser Interview Highlights: Likes Tapering, Too Early to Discuss Exiting
INTERVIEW-U.S. FED'S PLOSSER SAYS MAY JOBS REPORT SHOWS SEQUESTER LESS DAMAGING THAN SOME FEARED, JOBS GROWTH MODERATE
FED'S PLOSSER COMFORTABLE WITH RECENT MARKET REACTION TO GROWING TALK OF SLOWING QE3; HIGHER TREASURY YIELDS 'NOT A BAD THING'
FED'S PLOSSER: LATEST FOMC MINUTES SHOW GROWING TALK AMONG POLICY-MAKERS OF SLOWING BOND BUYS; UNCLEAR WHEN MIGHT HAPPEN
PLOSSER: FED DIGGING DEEPER HOLE, RISKING CREDIBILITY BY NOT REDUCING QE3 NOW
FED'S PLOSSER: NOT YET REACHED CONSENSUS ON INITIAL SIZE OF QE3 TAPER
PLOSSER: FED FIRST NEEDS TO DECIDE TO TAPER QE, THEN PICK INCREMENT, THEN CHOOSE WHICH ASSETS
FED'S PLOSSER: JUNE MEETING TOO EARLY TO ADJUST LONGER-TERM 'EXIT STRATEGY' FOR REDUCING BALANCE SHEET
FED'S PLOSSER COMFORTABLE WITH RECENT MARKET REACTION TO GROWING TALK OF SLOWING QE3; HIGHER TREASURY YIELDS 'NOT A BAD THING'
FED'S PLOSSER: LATEST FOMC MINUTES SHOW GROWING TALK AMONG POLICY-MAKERS OF SLOWING BOND BUYS; UNCLEAR WHEN MIGHT HAPPEN
PLOSSER: FED DIGGING DEEPER HOLE, RISKING CREDIBILITY BY NOT REDUCING QE3 NOW
FED'S PLOSSER: NOT YET REACHED CONSENSUS ON INITIAL SIZE OF QE3 TAPER
PLOSSER: FED FIRST NEEDS TO DECIDE TO TAPER QE, THEN PICK INCREMENT, THEN CHOOSE WHICH ASSETS
FED'S PLOSSER: JUNE MEETING TOO EARLY TO ADJUST LONGER-TERM 'EXIT STRATEGY' FOR REDUCING BALANCE SHEET
1:17PM :
ALERT ISSUED:
MBS Stretching Boundaries of Low Range; Reprice Risk Increasing
Little has changed from previous updates in terms of news or data, but the "risk-on" bid continues to pressure bond markets. Fannie 3.5s are now into the zone where we'd expect a higher likelihood of negative reprices (under 103-09). Fannie 3.0s are down 17 ticks at 100-06 and 10's are up 8bps on the day at 2.16. Reprice risk is shifting from "possible" to "likely."
11:25AM :
ALERT ISSUED:
Trouble With 2.14. 10's Breaking Higher. MBS Disapprove!
After testing 2.14 for a third time, 10's just broke higher and trading has been choppier in the past 5 minutes--currently 2.15. MBS had been doing a pretty good job of groundholding, but are voicing their disapproval of the slippage in 10's. Fannie 3s are down 12 ticks now to 100-11 and 3.5s down 9 ticks to 103-11.
This is borderline reprice risk territory for some lenders, but we'd like to hope it would take more losses before we'd see one, and would like to hope even more that we don't find out. Either way, increased vigilance for now, and maybe even some reprice potential depending on the jumpiness of the lender and when they were out with sheets.
If nothing else, it's a heads up that risk is increasing, but that's getting to be more of a trend with the break above 2.14 in 10s.
This is borderline reprice risk territory for some lenders, but we'd like to hope it would take more losses before we'd see one, and would like to hope even more that we don't find out. Either way, increased vigilance for now, and maybe even some reprice potential depending on the jumpiness of the lender and when they were out with sheets.
If nothing else, it's a heads up that risk is increasing, but that's getting to be more of a trend with the break above 2.14 in 10s.
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.
Scott Valins : "REPRICE: 2:14 PM - Plaza Worse"
Matthew Carver : "2nd round for Flag"
Matthew Carver : "REPRICE: 1:59 PM - Flagstar Worse"
Christopher Stevens : "REPRICE: 12:12 PM - Chase Worse"
Christopher Stevens : "REPRICE: 12:06 PM - Flagstar Worse"
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