MBS Live: MBS Afternoon Market Summary
The "uneventful" nature of today's session looked to be in the cards as early as last week
when markets failed to muster any meaningful response to Bernanke's two days of Congressional
testimony. You may have noticed a distinct cynicism set in, at that point, regarding
prospects for meaningful movements between now and next week's FOMC Announcement and Nonfarm
Payrolls report. Days like today are the evidence. Treasuries were quiet overnight, both in
terms of volume and volatility. While MBS were at least somewhat actively traded today, they
were far from volatile with Fannie 3.5s (which now take over as "slightly more relevant" than
Fannie 4.0s in terms of reprice risk) holding a 7/32nds range between 101-10 and 101-17.
Modest gains at the open were improved upon somewhat by the close. Weaker-than-expected
Existing Home Sales data was moderately helpful at 10am and some lenders repriced positively
in the early afternoon. Rate sheets are back in line with July 1-2 levels.
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.
3:35PM :
Holding Ground For Now; Reprice Risk Fades
MBS and Treasuries have both held their ground against earlier weakness. This eliminates or greatly moderates any negative reprice risk that had been developing after 2pm and sets up supportive "ledges" in MBS prices that can be watched for any resurgence of risk between now and 5pm. For Fannie 3.5s, that ledge would be at 101-11 and for Fannie 4.0s, 104-06. The analogous level in 10yr yields would be just over 2.49, but in general, the subdued nature of today's trading is its most striking feature (so we're not expecting drama). Volumes will end up being some of the lowest of the year and volatility is every bit as low as it was last week.
2:21PM :
ALERT ISSUED:
First Appearance of Negative Reprice Risk
This isn't necessarily a full-blown negative reprice alert, but reprices are technically possible with Fannie 3.5s 6 ticks off highs (101-11+ vs 101-17), even if not exceptionally likely. We'd also note Fannie 4.0s are only 2 ticks off highs at 104-08. 10yr yields gently tapped their session highs at 2.494 and are now back down to 2.488. The weakness is not event-driven, and the emphasis here is on the somnambulance of trading levels and activity rather than the observance of highly correlated market movers. Bottom line: some risk, but not too much yet. Know thy lender , and be careful where needed.
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.
Mike Drews : "REPRICE: 1:03 PM - Chase Better"
Grant R. Menard : "I believe the Fed at least had to try and see if this economy had "legs"... It's like child.. you hate to see them fall down, but it's the only way to learn how to walk "
Jeff Anderson : "If/when the housing numbers drop again next month, I'll be curious to see what impact that has on the Fed's data dependent template."
Andy Pada : "i'm commenting on MG's reuters poll...the Fed's desire for transparency and their reiteration of a data dependent template seems to have fallen on the deaf ears."
Richard Carvajal : "How likely do you guys see the Fed coming out and saying "We will start tapering in Sept" at the FOMC meetings next week?"
Tim Y : "REPRICE: 12:14 PM - Franklin American Better"
Matthew Graham : "REUTERS POLL-54 OF 56 ECONOMISTS MADE NO CHANGE TO FORECAST FOR TIMING OF FED QE TAPERING AFTER BERNANKE TESTIMONY LAST WEEK "
Matthew Graham : "REUTERS POLL-38 OF 56 ECONOMISTS EXPECT U.S. FEDERAL RESERVE TO START REDUCING ITS BOND PURCHASES BY SEPTEMBER "
Justin Shead : "Plus I see pricing from 25 of the 50 states and we are seeing solid broad based growth in purchase money and home prices"
Justin Shead : "Virginia Beach is a nice cross section of the country. I agree with AD"
Adam Dahill : "I see a leveling off but not really a correction over here"
John Toepfer : "AD = i can't see any reason for a med. price increase of 33% YOY, and an average value increase of 22%. I personally wouldn't be rushing into a market like that. This time we can't blame appraisers and overinflated values. It is lack of inventory and the combined sentiment from buyers that they are missing their chance w/ low rates and limited supply. There has to be some correction."
Adam Dahill : "I have to disagree with the bubble talk. The last time around they were giving loans away with 100% SIVA loans. Today you need large DP and tight underwriting. Also many deals are being done with Cash. It's a different marker"
John Toepfer : "TR - the median home price in San Francisco is up to 1.0M; 33% from last year....can you say bubble?!!"
Bert Swyers : "2.46 strong like bull"
Jeff Anderson : "It looks pretty, but if we can't crack 2.46 I can't imagine we go too far."
Raul Lopez : "uptrend channel developing?"
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