MBS Live: MBS Afternoon Market Summary
Illiquidity was especially evident in MBS today though was a problem for Treasuries at times as well. Bond markets operated in fits and starts, jolting higher in unevenly-sized chunks in the first hour of the day before selling-off in a similar fashion for the rest of the day. Treasury charts show the clearest picture of the day's bias, which was the 9am to 3pm sell-off mitigated briefly by the Fed's scheduled buying in the 10:15-11:00am hour. MBS were able to fight off a good amount of the earlier weakness, but primarily because they simply weren't liquid enough to keep pace with Treasuries. The latter also suffered incrementally vs MBS due to corporate deal pricings (where Treasuries are occasionally sold as a part of the rate-lock process).
A case could also be made for technical resistance at 2.575 in 10yr yields (which was broken in the morning, but was also the point at which the selling steepened into the afternoon. We won't make that case just yet because this could just as easily have been a factor of lunch time in NY on an illiquid summer Monday. The same sort of case could be made for "caution ahead of tomorrow's important Retail Sales numbers," and this too would constitute a certain "reaching too far" for answers where none exist. And that's OK. At the end of the day, we simply had a bond market that was sideways in the bigger picture against the backdrop of the recent range. The fact that last week drifted into more positive territory and that this morning was bullish, makes the selling seem far more pronounced than it is.
This is evident in the chart below where 9 out of the last 11 sessions have both opened and closed in the same narrow trend (yellow lines on MBS chart). Similarly boring is the fact that 10yr yields are simply right at their linear regression line running back to the June 19th FOMC Announcement.
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.
2:18PM :
ALERT ISSUED:
Negative Reprices Becoming Likely for Most Lenders
Although several lenders have already repriced, more will likely follow. Most lenders are likely to be considering reprices with Fannie 3.5s now off 4 ticks at 100-27 and Fannie 4.0s into negative territory at 103-31. 10yr yields are up over 2.6035.
1:40PM :
ALERT ISSUED:
Incremental Increase in Negative Reprice Risk
We're still not quite to "full-blown" in terms of the likelihood of negative reprices, but the risks are higher than they were at last check. MBS have shed another 2 ticks and Treasuries have moved further into negative territory. Fannie 3.5s are approaching unchanged levels after being up 8 ticks, currently 100-31. Fannie 4.0s are down to 104-02 afer being as high as 104-08 earlier and 10yr yields are up to 2.5963 after hitting 2.553 earlier this morning.
1:06PM :
Fed's Cues on Rates More Critical Than Bond Buys: Fed Study
(Reuters) - For investors trying to pinpoint when the Federal Reserve will likely end its massive bond-buying program, the message from researchers at a pair of influential regional Fed banks was clear: don't bother.
More crucial in terms of monetary policy's impact on U.S. growth and inflation will be signals from the U.S. central bank on when it will start to raise short-term interest rates from their current near-zero level, economists at the San Francisco Fed and the New York Fed wrote in the latest issue of the San Francisco Fed's Economic Letter published on Monday.
The Fed's bond-buying programs have given a moderate boost to the economy, but they would have far less impact without the Fed's simultaneous promise to keep rates low, they showed.
The finding, they said, goes not only for past rounds of quantitative easing, but also for the Fed's current and third round, known as QE3.
"Our analysis suggests that communication about when the Fed will begin to raise the federal funds rate from its near-zero level will be more important than signals about the precise timing of the end of QE3," San Francisco Fed senior economist Vasco Curdia and New York Fed senior economist Andrea Ferrero wrote.
More crucial in terms of monetary policy's impact on U.S. growth and inflation will be signals from the U.S. central bank on when it will start to raise short-term interest rates from their current near-zero level, economists at the San Francisco Fed and the New York Fed wrote in the latest issue of the San Francisco Fed's Economic Letter published on Monday.
The Fed's bond-buying programs have given a moderate boost to the economy, but they would have far less impact without the Fed's simultaneous promise to keep rates low, they showed.
The finding, they said, goes not only for past rounds of quantitative easing, but also for the Fed's current and third round, known as QE3.
"Our analysis suggests that communication about when the Fed will begin to raise the federal funds rate from its near-zero level will be more important than signals about the precise timing of the end of QE3," San Francisco Fed senior economist Vasco Curdia and New York Fed senior economist Andrea Ferrero wrote.
12:58PM :
ALERT ISSUED:
Treasuries Turn Red; MBS Moving Off Highs; Risk Increasing
Fannie 3.5s are only 3 ticks off their highest possible rate sheet levels, so negative reprice risk isn't full-blown by any means, but the trend has been negative for Treasuries since just after 9am. MBS have done a good job of holding sideways throughout the Treasury slide, but are finally showing some signs of wear. Faster-acting lenders could soon be considering negative reprices if we hold here or fall farther. Fannie 3.5s are still 4 ticks up on the day, but 3 ticks off highs at 101-02. Fannie 4.0s are also 4 ticks higher on the day, but 3 ticks off highs at 104-04.
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.
Timothy Baron : "REPRICE: 2:36 PM - 360 Mortgage Worse"
Nate Miller : "REPRICE: 2:31 PM - Green Tree Worse"
Jerrod Nash : "REPRICE: 2:30 PM - PennyMac Worse"
Steve Chizmadia : "REPRICE: 2:27 PM - Sun West Mortgage Worse"
Morgan Hammer : "REPRICE: 2:23 PM - AMX Worse"
Ben Biscoe : "REPRICE: 2:22 PM - Wells Fargo Worse"
Ben Biscoe : "REPRICE: 2:22 PM - USBank Worse"
Frank Guirguis : "REPRICE: 2:21 PM - Flagstar Worse"
David Straight : "REPRICE: 2:21 PM - Chase Worse"
Christopher Stevens : "REPRICE: 2:20 PM - Flagstar Worse"
Nate Miller : "REPRICE: 2:19 PM - Caliber Funding Worse"
Jerrod Nash : "chart looks like a sweet roller-coaster today."
Matthew Graham : "RTRS- U.S. JULY BUDGET DEFICIT $97.6 BLN (CONSENSUS $96 BLN DEFICIT) VS JULY 2012 DEFICIT $70 BLN - TREASURY "
Bert Swyers : "REPRICE: 1:52 PM - NYCB Worse"
Rob Clark : "REPRICE: 1:51 PM - Provident Funding Worse"
Matthew Graham : "for example, even in Treasuries, who have the worst end of the deal today, it's hard to detect any of today's weakness on a longer term chart: http://screencast.com/t/qHWhq1PJX"
Matthew Graham : "there is no satisfying "cause and effect." Very thin markets are easier to push around. Even then, the moves are way way smaller than they look based on these 2-day charts."
Tim Y : "what is causing this movement? "
Matthew Graham : "RTRS - FED'S SIGNALS ON RATES MORE IMPORTANT THAN CUES ON WHEN BOND-BUYING WILL END -- FED STUDY "
Robert Rippy : "If you raise the rate and the lender pays it then you would not disclose the UFMIP on the GFE and it would not affect the APR"
Robert Rippy : "Nathan, i would think that would depend on whether yuo are doing borrower paid or lender paid "
Nathan Stotlar : "Anyone know if Single Premium MI effects APR the same way as UFMIP?"
Jason Northcutt NMLS#994555 : "Wells Fargo has revised its pricing adjusters for its Non-Conforming products, both Best Efforts and Mandatory. Effective immediately, all loan amounts between $417,000 and $625,500 are subject to a -.500 adjuster, while the adjuster for loan amounts under $417,000 has been changed from -1.00 to -1.500. The purchase special has been reduced from .750 to .625. "
Jason Northcutt NMLS#994555 : "Thought this was interesting...this is on their retail side. They were neck and neck with rates with corpsonds..but now may be higher on the rate...."
Matthew Graham : "http://screencast.com/t/o8oGkokBJ "
Andrew Russell : "Is there a national figure of the % of loans being done, that are GSE vs portfolio/etc?"
Justin Harward : "It's another problem for some future unnamed president to figure out"
Matthew Graham : "but it's already happening. G-fee hikes... risk-sharing auctions (already completed, more to come I'm sure). The process is underway, even if we don't know what the end result will be."
Hugh W. Page : "When 9/10 loans are govt backed you can't change the current system without huge disruptions. I bet it's 5 yrs + before anything happens and if it does it will be very gradual and announced way in advance. "
Andy Pada : "I thought the same AR"
Andrew Russell : "at best...I thought they were combining them to 1 GSE, and toying with the idea of the "bad bank", that soaked up the bad assets?"
Andrew Russell : "Hugh, nice article. I particularly like the conclusion: Mr. Obama’s views on the path forward for housing finance are welcome. But much work needs to be done before private capital will come back to this market. Eliminating conflicts of interest and increasing transparency in the securitization process will go a long way to achieving that end."
Rob Clark : "Josh I moved so I do have a new number 209-227-7745"
Josh Stika : "Rob Clark - are you out there? I've got a very good referral for you!"
Charles Tadros : "REPRICE: 11:49 AM - Provident Funding Better"
Hugh W. Page : "Interesting article I saw this morning on just that AP http://www.nytimes.com/2013/08/11/business/the-housing-market-is-still-missing-a-backbone.html?smid=tw-share&_r=0"
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