MBS Live: MBS Afternoon Market Summary
Fannie 3.0s ALMOST hit all-time highs today, briefly touching 106-01 in what was mostly a sideways grind around 105-29 this afternoon. This is the second day in a row where MBS have opened very close to the previous session's afternoon levels and drifted mostly calmly higher with a fairly standard amount of volume and generally subdued volumes in related markets. Things seem to have gone into "eerily silent mode" partly in anticipation of Friday's Jobs numbers and specifically today, on a relative lack of data and events.
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.
2:43PM :
ALERT ISSUED:
Low Volume Grind To Day's Best Levels. Positive Reprices Reported
The day that looked uneventful from afar continues to be uneventful as it slowly ticks by. But this is the sort of uneventful day that we enjoy, where MBS tick slowly and steadily higher, much like yesterday. Treasuries and stocks as well, are exceedingly similar in shape to yesterday's session.
The fact that markets are doing a good job of following each others' movement has a lot to do with the relative lack of data to begin the week as well as the looming importance of Friday's employment data. There's not much to think about in terms of domestic market movers though it's easy to remember that the Fed is a massive buyer of MBS, so that's an easy one to trade higher.
Fannie 3.0s are at their highs of the day, up 6-7 ticks at 105-30 to 105-31, just a few ticks off their all-time highs at 106-02. Several lenders have reprices positively, and more may follow if we continue to hold or improve upon these levels.
The fact that markets are doing a good job of following each others' movement has a lot to do with the relative lack of data to begin the week as well as the looming importance of Friday's employment data. There's not much to think about in terms of domestic market movers though it's easy to remember that the Fed is a massive buyer of MBS, so that's an easy one to trade higher.
Fannie 3.0s are at their highs of the day, up 6-7 ticks at 105-30 to 105-31, just a few ticks off their all-time highs at 106-02. Several lenders have reprices positively, and more may follow if we continue to hold or improve upon these levels.
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.
Eric Franson : "REPRICE: 3:01 PM - Wells Fargo Better"
Matt Sullivan : "just looked at the sheet 9/6 for refinances and 9/28 for purchases"
Matt Sullivan : "not from what I understand....got caught all the way up"
Dirk Postupack : "Matt S......if 5/3rd still taking 75 days to get refi's done?"
Matt Sullivan : "REPRICE: 1:56 PM - Fifth Third Mortgage Better"
Matthew Graham : "no, nothing to do with taking time to get things set up in their system. That's done well in advance of it making sense for them to offer the lower rates. They offer them and are prepared to portfolio them if the market bounces. If it doesn't, they're prepared to trade them. If that happens, then gradually others will visit their farm, grab a back of seeds, and plant some of their own. "
Matthew Graham : "those "some lenders" also answer BB's question.... They're big enough to not need to sell it as MBS if they don't want to. They "seed" the market due to their size."
Alan Kramer : "Takes them time to get all of this set up in their systems... They want to have the new rates established in advance so they can smoothly move lower (if that is where the market goes)..."
Matthew Graham : "yes. what you say, has actually already happened. AK, which is why AQ referenced private convos to make such things happen. Some lenders even forgo the huge drop-offs you mention. "
Brent Borcherding : "So how do they know to put them on a rate sheet if they don't "know" someone is there to buy them?"
Alan Kramer : "Agree - rate sheets come first. Have you seen all the lenders now offering rates on conv. 30yr all the way down to 2.75%??? That rate will cost you 6 points, but the rates are being quoted. Seems to me that once more than one or two fringe lenders start putting out rates sheets down to the next resistance level (of the next-lower coupon) it would make sense to begin tracking that coupon..."
John Toepfer : "MG - that was awesome - you should just cut and paste all of that and turn into a post for posterity. "
Matthew Graham : "gotta have your deal in hand in some form (even if it's speculative, which is risky), before I can sell a 2.5 MBS, and that means that the rate has to be on a rate sheet. IF that starts happening with more people, more often, then yes, rates will go lower if rates go lower, and of course, as I point out re: "highest and best use," there are certain spots with more inertia than others due to the underlying coupons, 3.25% being one of them. But higher rates still = higher rates, and vice versa."
Matthew Graham : "rates and closed loans come first, MBS originations follow"
Alan Kramer : "said another way, when there is real volume in 2.5s, wouldn't that dry up much of today's volume in 3.5s?"
Matthew Graham : "so you're saying when rates move lower, then rates will be lower? I'd agree with that"
Alan Kramer : "Today, conventional loans below 3.25% are available, but they are very expensive niche products. Makes sense that the 'sweet spot' would not be focused on only a SINGLE coupon and instead tradeoff between two coupons, but still, once 2.5s are trading with any real liquidity (shared with 3.0s), the under-3.5% loans should be moch more mainstream (and less xpensive) than they are today..."
Matthew Graham : "it was the case many times that 2 days of the week would favor 3.0s while 3 would favor 3.5s or vice versa."
Matthew Graham : "because daily origination tallies proved that to very much NOT be the case with respect to the interplay between 3.0s and 3.5s. It's typically NOT the case that new MBS originations are so exclusively crammed into ONLY ONE coupon level. Historically we see more even distribution. 3.0s and 3.5s were doing a fairly good job of this when rates were a bit higher."
Alan Kramer : "yes - if we are solidly into 2.5's, the return to today's situation where we are facing resistance at 3.25% is less likely in the short-term..."
Matthew Graham : "coming from which direction? you mean if we break into 2.5s?"
Alan Kramer : "MG: I agree with everything you have said with one small addition - liquidity in a coupon can probably be seen as an iindicator that short-term return to resistance points such as 3.25% is less likely..."
Matthew Graham : "that was my (surprisingly recent) revelation. It really means close to nothing, and I feel bad for whatever part I played a year or two ago, in the mentality that lower coupon liquidity was some secret inside line on where rates were going or even in where rates "inertia" was building."
Matthew Graham : "increase in buying in lower coupons is purely incidental."
Matthew Graham : "BB, I disagree, an increase in buying in lower coupons is old news by the time you look at rate sheets. Those will have already told you the "is good!!!!!" part"
Matthew Graham : "or "conventional 30yr fixed interest rates" would be the better way to say that"
Matthew Graham : "In other words, if you were generally feeling "floaty," you could pretty much count on a rates rally slowing down at such a point where rates are as low as the current low coupon will allow. In other words, big pause at 3.25% in Fannie 30s."
Brent Borcherding : "Yes, but all things being as they are...an increase in buying in a lower coupon is good!!!!!"
Matthew Graham : "The rate is the rate is the rate TODAY, and is most likely to move wherever markets are moving. The highest and best use of knowing the underlying coupons is to understand where the relative points of resistance will be in assessing "float targets.""
Matthew Graham : "Dealers could be piling into 2.5's in large numbers (in a hypothetical future situation), and it wouldn't mean squat if rates, in general, embarked on a selling trend. They could be "all-in" to 2.5s and if markets turn to the downside, the fact that they're "all-in" does nothing to foreshadow lower rates ahead because rates will be moving quickly higher and convexity selling will get them right back out of 2.5's again. "
Matthew Graham : "In other words, liquidity in the next lower coupon means relatively nothing, and ESPECIALLY means nothing if you simply talk to a loan officer and get a rate quote. Rates are where they are, and if markets move higher in price (or if the Fed commits to buy MBS), then rates get better. But the biggest and most important thing to understand is this:"
Matthew Graham : "While that specific line of thinking isn't entirely bogus, the inertia of shifting to a lower coupon in MBS is infinitesimally small compared to the twofold titans of Fed policy and broader market movements."
Matthew Graham : "After all, if the big boys are trading it, it must have been a big consideration for them to dip their toes in that water, right? So we should expect there to be some level of inertia with them continuing to hang out in that area?"
Matthew Graham : "In other words, I thought that if I knew that dealers were trading more and more 3.0s that it would somehow guarantee that rates from 3.25 - 3.75 would somehow have an additional layer of probability"
Matthew Graham : "I used to believe/think/hope that there was some sort of inside line as to the future of mortgage rate movements, and that this inside line, this crystal ball, might have to do with the liquidity in the next lower coupon. "
Matthew Graham : "Sorry to be a bit late to the 2.5 convo, but here's the major problem I INFER from what seems to be an unhealthy fascination with "the next lower coupon." (incidentally, this is near and dear to my heart because even I had a similar unhealthy fascination with 3.0s when they were new, so I speak from experience and solidarity, as opposed to a soap box, but hear me out):"
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