MBS Live: MBS Afternoon Market Summary
After opening in stronger territory and continuing some of that strength through the first round of morning data, bond markets began selling off just before 9am. Even before the 9:45am release of the Chicago PMI data, we managed to find some footing as markets ostensibly waited for the report. The weaker-than-expected headline and Employment component of the report helped Treasuries and MBS move away from their holding pattern at the weakest levels of the morning. Mid-day brought Bank Stress Test results out of Spain, suggesting that only €60 bln out of the tentatively allocated €100 bln in potential bailout funds would be needed in a worst-case-scenario. We're wondering if the same quantitative minds that measured the size of Spain's worst case also had a hand in measuring the Eiffel tower in the new iPhone maps (screenshot). Whatever the case, bond markets didn't like it, giving back most of the day's gains by 1pm and re-engaging cruise control from there.
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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Pricing as of 4:04 PM EST |
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.
2:41PM :
ALERT ISSUED:
MBS Bounce Back In Late-Day Flurry Of Activity
Trading was fairly slow from 1-2pm and has recently ramped up a bit as bond markets bounce back from the weaker levels of the day. MBS are back in the green with Fannie 3.0s up 3 ticks on the day to 105-17. 10yr yields are off their 1.65 highs and back down to 1.63's.
Whether or not the bounce back in MBS will be sufficient for POSITIVE reprices likely depends on the lender. Negative reprices were still coming in even after the bounce began to materialize.
At lease we can say that reprice risks are more balanced now. While negative reprices are still possible, and equal case could be made for positive reprices among lenders who repriced for the worse just after noon.
Whether or not the bounce back in MBS will be sufficient for POSITIVE reprices likely depends on the lender. Negative reprices were still coming in even after the bounce began to materialize.
At lease we can say that reprice risks are more balanced now. While negative reprices are still possible, and equal case could be made for positive reprices among lenders who repriced for the worse just after noon.
12:31PM :
The never-ending story of the Euro crisis
A few days old now, but so good that it will continue to transcend the datestamp for the near-term foreseeable future.
Counterparties: The Never-Ending Story Of The Euro Zone Crisis
The pattern of Euro crisis flare-ups is getting very familiar:
Step 1: News of political turmoil in ailing European Country X raises questions about their dedication to austerity. This is often be accompanied by missing deficit targets, riots and/or burgeoning political change.
Step 2: The bond market freaks out, which raises borrowing costs for European Country X. Wonks, politicians and pundits quickly chime in.
Step 3: The can is thoroughly kicked down the road. Concessions are made for Country X, negotiations are held, quotes are given/intentions leaked.
Step 4: After some period of time, the crisis appears again.
Spain, like Greece, is is back in the Euro crisis spotlight today, as the country is gripped by massive protests over budget cutbacks and rising borrowing costs. Greece, of course, has been through this process before; Spain has now proceeded to step 2.
Read the rest here:
Counterparties: The Never-Ending Story Of The Euro Zone Crisis
The pattern of Euro crisis flare-ups is getting very familiar:
Step 1: News of political turmoil in ailing European Country X raises questions about their dedication to austerity. This is often be accompanied by missing deficit targets, riots and/or burgeoning political change.
Step 2: The bond market freaks out, which raises borrowing costs for European Country X. Wonks, politicians and pundits quickly chime in.
Step 3: The can is thoroughly kicked down the road. Concessions are made for Country X, negotiations are held, quotes are given/intentions leaked.
Step 4: After some period of time, the crisis appears again.
Spain, like Greece, is is back in the Euro crisis spotlight today, as the country is gripped by massive protests over budget cutbacks and rising borrowing costs. Greece, of course, has been through this process before; Spain has now proceeded to step 2.
Read the rest here:
12:16PM :
ALERT ISSUED:
Biggest Pop Of The Day On Spain Stress Tests. Bad News For MBS
Essentially, the results of Spain's Bank stress tests indicate that the amount of bailout funding currently being discussed (€100 bln) would be more than sufficient to recapitalize a "worse-case-scenario" (€60 bln according to today's stress tests). This has stocks on the rise and bond markets on the run at the quickest pace and highest volumes of the day, not to mention the fact that it shows where markets' attention continues to be most directly focused.
MBS fell further from earlier lows, hitting 105-10 at the trough, but up to 105-12 presently. Definitely well into negative reprice territory here.
MBS fell further from earlier lows, hitting 105-10 at the trough, but up to 105-12 presently. Definitely well into negative reprice territory here.
11:53AM :
ALERT ISSUED:
More Pronounced Weakness Now As MBS Approach Negative Territory
Fannie 3.0s are only up 1 tick from yesterday's closing levels now, and those closing levels represented a drop-off from much of the day's action. We're now at the lowest levels since Tuesday morning painting a picture of broader consolidation of the post-QE3 rally. Negative reprice risk is incrementally increased on this most recent downtick, not to the extent that every lender will reprice, but upgraded from a "heads up" status.
11:28AM :
ALERT ISSUED:
MBS Hit Lows Of The Morning, Underperforming Treasuries
In much the same way that it wasn't a good idea to pay much attention to Treasuries just after the QE3 Announcement, it's not such an informative thing today either. Whereas 10yr yields are mid range and in decidedly better territory than most of yesterday, MBS are at their lows and decidedly in line with their weakest levels yesterday.
This is more of a heads up than a reprice alert, thanks to the big slide in prices from 9am to 9:45am. Fannie 3.0s moved from 105-26 to 106-18 during that time, which led up perfectly to rate sheet generation times.
We bounced up to 105-22 at 10am, but that still leaves the current prices only 3-5 ticks weaker than rate sheet time (assuming the most aggressive outlying tick in prices is the baseline for those rate sheets). That should offer a fair amount of insulation against reprice risk, but falling through the morning lows would naturally increase those risks. As for now, we're livin' on the edge.
The fact that Treasuries are not exhibiting the same weakness lets you know that we're not dealing with a major, underlying market-mover here, and more likely the weakness is related to month-end tradeflows and another potentially big day of supply for MBS.
This is more of a heads up than a reprice alert, thanks to the big slide in prices from 9am to 9:45am. Fannie 3.0s moved from 105-26 to 106-18 during that time, which led up perfectly to rate sheet generation times.
We bounced up to 105-22 at 10am, but that still leaves the current prices only 3-5 ticks weaker than rate sheet time (assuming the most aggressive outlying tick in prices is the baseline for those rate sheets). That should offer a fair amount of insulation against reprice risk, but falling through the morning lows would naturally increase those risks. As for now, we're livin' on the edge.
The fact that Treasuries are not exhibiting the same weakness lets you know that we're not dealing with a major, underlying market-mover here, and more likely the weakness is related to month-end tradeflows and another potentially big day of supply for MBS.
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.
Matt Hodges : "USB rp .375% worse... victor's advice is sage"
Victor Burek : "if your lender repriced worse, i would float..if you have morning pricing still, i would probably lock it despite not liking to lock loans on friday"
Oliver S. Orlicki : "VB, talk to me"
Oliver S. Orlicki : "refi closing in 10 days, float or lock?"
Victor Burek : "REPRICE: 2:46 PM - Nexbank Worse"
Michael Tadros : "REPRICE: 2:18 PM - Stearns Lending Worse"
Michael Tadros : "REPRICE: 2:17 PM - Provident Funding Worse"
Michael Mitchell : "REPRICE: 2:06 PM - Suntrust Worse"
Ross Miller : "REPRICE: 1:00 PM - NYCB Worse"
Ross Miller : "REPRICE: 12:59 PM - MSI Worse"
Josh Stika : "REPRICE: 12:38 PM - Provident Funding Worse"
Matthew Graham : "http://money.msn.com/investing/the-real-problem-plaguing-europe"
Matthew Graham : "Great article AH. The thesis is and has been one of the most important things to understand about the EZ crisis: that it's political as much as economic. Another good find! (I remember you linked that last night, but I wasn't clinically awake at the time, so didn't read it)."
Andrew Horowitz : "MG did you read Jubak's piece last night?"
Ira Selwin : "REPRICE: 12:26 PM - Chase Worse"
Eric Franson : "REPRICE: 12:18 PM - Wells Fargo Worse"
Matthew Graham : "RTRS - EU COMMISSION SAYS SPANISH BANKS' RECAPITALISATION NEEDS ANNOUNCEMENT A KEY STEP IN RESTORING SOUNDNESS OF THE SECTOR-STATEMENT "
Matthew Graham : "Cue the generic atta boy's from the EU"
Jodi White : "REPRICE: 12:15 PM - BB&T Worse"
Matthew Graham : "i'd link this thing every day. I'd print it on a T-shirt if I could: http://blogs.reuters.com/felix-salmon/2012/09/26/counterparties-the-never-ending-story-of-the-euro-crisis/"
Victor Burek : "it is getting quite comical"
Victor Burek : "ref to that felix blog mg..going back to step 2"
Matthew Graham : ""up to 100 bln" on the table in terms of bailout funds"
Jeff Anderson : "What were expectations? Any idea? Is that better or worse than expected?"
Matthew Graham : "RTRS - SPAIN SAYS 7 BANKS HAVE CAPITAL NEEDS, 7 DO NOT "
Matthew Graham : "RTRS- SPAIN SAYS BANK SYSTEM'S CAPITAL SHORTFALL IS 59.3 BLN EUROS IN STRESSED SCENARIO "
Victor Burek : "stress test says they only need 60b euros"
Matthew Graham : "Spain time apparently"
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