MBS Live: MBS Afternoon Market Summary
Bond markets began the day in the red after an overnight session that was less than exciting or even interesting.  Treasuries simply drifted higher in yield, ultimately hitting the domestic session in the 1.74s while MBS started the day in the low 104-20's in Fannie 3.0s.  By the end of the session, MBS had climbed well into the low 105's (currently 105-06) and 10yr yields dropped into the high 1.6's (currently 1.68+).  Things were sideways and grindy, even if slightly positive, for the balance of the morning, but the tide shifted in the afternoon as an exceptionally strong 10yr Treasury auction managed to breathe some life into the plodding rally.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
105-05 : +0-08
FNMA 3.5
106-18 : +0-05
FNMA 4.0
107-08 : +0-04
FNMA 4.5
108-02 : +0-03
GNMA 3.0
106-25 : +0-09
GNMA 3.5
108-28 : +0-05
GNMA 4.0
109-11 : +0-03
GNMA 4.5
109-10 : +0-02
FHLMC 3.0
105-01 : +0-10
FHLMC 3.5
106-13 : +0-05
FHLMC 4.0
106-29 : +0-02
FHLMC 4.5
107-11 : +0-03
Pricing as of 4:03 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.

2:08PM  :  Beige Book Uneventful, But With Some Housing/Mortgage Specifics
Excerpts from the Beige Book:

(Prepared at the Federal Reserve Bank of Boston and based on information collected on or before August 20, 2012. This document summarizes comments received from business and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials. )

On mortgages:
" In the residential mortgage market, demand was described as stable to very strong, with a high percentage of applicants looking to refinance. Several bankers expressed concern about the low interest rate environment and compliance costs related to new regulations and their effect on profitability. We heard a few reports about a moderate loosening of lending guidelines."

On Housing:
"Reports from home-builders on single-family housing starts during July were mixed, although all of our contacts said that activity had improved compared to a year ago. Sales contracts were in all price-point categories. Homebuilders anticipate only a modest increase in the construction of single-family homes in the near term; however, opportunities for rehabilitating old buildings into apartments and constructing new apartments and special-needs housing are viewed as strong. Selling prices of new single-family homes were up slightly during the past six months, and rents increased in the low to mid-single digits. The volatility seen in building material prices over the past five months is beginning to subside, although there is still upward pressure on lumber prices. "
1:15PM  :  ALERT ISSUED: Bond Markets Add To Gains After STRONG 10yr Auction
MBS and Treasuries both moved to their best levels of the day immediately following a relatively amazing 10yr Treasury Auction at 1pm Eastern. The auction garnered significantly lower-than-expected yields 1.70 vs 1.718 when-issued at 1pm) and higher-than-expected demand (Bid-to-Cover 3.26 vs 2.85 last time).

10's rallied quicker than MBS in the immediate wake of the auction, and although both have encountered some resistance, current levels in MBS are sufficient for positive reprices depending on the lender.
12:29PM  :  ALERT ISSUED: MBS Trudge Back To Neutral Territory Ahead Of Treasury Auction
Trading continues to be quite light overall and bond markets continue looking for guidance wherever they can get it. Since just before 11:00am, the guidance looks to have come from equities in addition to a good technical bounce for 10yr yields at 1.748.

MBS have generally followed the move higher and Fannie 3.0s now sit at 104-29, unchanged vs yesterday's latest levels (November coupons).

The 10yr Treasury auction at 1pm is the next potential market mover (at least as far as scheduled events are concerned). Today's is the 2nd and final Re-opening of the record low 1.625 coupon awarded at the 8/8/12 Refunding. Brush up on "Treasury Auction Jargon" HERE.

Reopenings are generally stronger auctions than refundings, though this particular 1.625 coupon (the coupon is decided by the stopping yield at the Refunding auction) has been more problematic than most of the recent 10yr auctions. Only 3 times in the last 10 auctions has the stopping yield come in higher than expected and two of those three were the with this most recent vintage.

Markets will be expecting a bid-to-cover near 3.0, but we'd note the previous auction's BTC of 2.85 is a more informative benchmark than recent averages, which are pulled higher by the insanely strong auction on 7/11/12 which came in a whopping 3.61 BTC. More important than the cover will be the stopping yield relative to the expected yield (as determined by 1pm "when-issued").

For now, MBS moving into the green DOES introduce slight possibilities of positive reprices from a small group of lenders, but when we say small, we mean 1 or 2. Most would likely need to see additional gains coming out of the Auction for such possibilities to further develop.
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.

Victor Burek  :  "REPRICE: 3:40 PM - Nexbank Better"
Steve Chizmadia  :  "REPRICE: 3:20 PM - Pinnacle Better"
Eric Franson  :  "REPRICE: 2:59 PM - Wells Fargo Better"
adam elway  :  "REPRICE: 2:58 PM - Stearns Lending Better"
Justin Dudek  :  "REPRICE: 2:40 PM - Everett Financial Better"
Dan Ramirez  :  "Thank you AQ & MG much better understanding"
Tom Schwab  :  "REPRICE: 2:32 PM - Flagstar Better"
Adam Quinones  :  "3.5s are "in the money". Borrowers who closed in the last few years and had their loans pooled into 3.5 coupons are up for another refinance. Investors dont want to pay 106-16 only to have the underlying loans pay off at par."
Matthew Graham  :  "Dan, I assume you're asking why 3.5's aren't moving as much relative to 3.0s? If that's the case, then the simple answer is that MBS have generally moved aggressively down-in-coupon since QE3. With rates such that 3.0 coupon 30yr MBS are the most heavily originated coupon, market participants can count on almost all of those being bought by the Fed. With all that inherent demand, there's a concomitant need to vacate 3.5s. When the long end of the yield curve is rallying it simply adds to the"
Adam Quinones  :  "it's the prepay ledge Dan."
Jeff Anderson  :  "REPRICE: 2:27 PM - Chase Better"
Dan Ramirez  :  "why arent we seeing the 3.5 move?"
Ted Rood  :  "I vote a big fat NO on the modified loan eligible for streamlining, Bryce."
Tom Schwab  :  "REPRICE: 2:17 PM - USBank Better"
Ray J  :  "or, i've been submitting more complete files..."
Ray J  :  "actually, i did noticed that but thought i was dreaming"
Jeff Anderson  :  "Did I miss the memo on "loosening of lending guidelines"? Did anyone see any loosening lately?"
Tom Schwab  :  "REPRICE: 2:03 PM - AMC Better"
Bryce Schetselaar  :  "does anyone know if a modified loan can be streamlined?"
Matthew Graham  :  "Pretty uneventful on the Beige Book... "
Matthew Graham  :  "RTRS- FED SAYS REAL ESTATE CONDITIONS IMPROVED IN LAST MONTH; MOST DISTRICTS REPORTED STRENGTHENING IN EXISTING HOME SALES"
Matthew Graham  :  "RTRS - FED SAYS EMPLOYMENT CONDITIONS LITTLE CHANGED; SOME BLAMED STAGNANT DEMAND AND POLICY UNCERTAINTY FOR HIRING RESTRAINT"
Matthew Graham  :  "RTRS- FED’S BEIGE BOOK SAYS U.S. ECONOMIC ACTIVITY EXPANDED MODESTLY IN MOST DISTRICTS; NEW YORK SAW LEVELING OFF, KANSAS CITY CITED SLOWING "
Michael Mitchell  :  "REPRICE: 1:59 PM - Kinecta Better"
BVG  :  "REPRICE: 1:56 PM - Interbank Better"
Rob Clark  :  "REPRICE: 1:14 PM - Provident Funding Better"
Bill Laffey  :  "it's for loans expiring after 11/9, tomorrow's 30 day would expire 11/9"
Victor Burek  :  "Santelli gave it a A+\"
Adam Quinones  :  "...so this timing is about right"
Adam Quinones  :  "shops that executes via MBS didnt have to account for it until December 1"
Victor Burek  :  "so they adding the gfee tomorrow?"
Adam Quinones  :  "they were baked into longer term locks and pricing based on cash-window execution"
Victor Burek  :  "arent gfees already in rate sheets"
Dirk Postupack  :  "and lose .625 on G-Fees"
Dirk Postupack  :  "but just need to let the markets do what they do."
Victor Burek  :  "wait til tomorrow and get .50"
Dirk Postupack  :  "Trust me AH.....I am looking for a 1/4 from Provi to hit the lock key"
Dirk Postupack  :  "let it settle in and see where we end up."
Matthew Graham  :  "those results in light of the preview in the 12:39pm update are pretty impressive"
BVG  :  "nice"
Andrew Horowitz  :  "nice auction"
Matthew Graham  :  "bond markets win!"
Matthew Graham  :  "RTRS- U.S. 9-YR 10-MO NOTES BID-TO-COVER RATIO 3.26, NON-COMP BIDS $12.89 MLN "
Matthew Graham  :  "RTRS- U.S. SELLS $21 BLN 9-YR 10-MO NOTES AT HIGH YIELD 1.700 PCT, AWARDS 6.04 PCT OF BIDS AT HIGH "
Matthew Graham  :  "1pm WI = 1.718"
Bryce Schetselaar  :  "Provi G fee went into effect for 30 day locks today. (all locks expiring after 11/9). So 45 or 60 day lock doesnt matter"
Dirk Postupack  :  "Tim....are you on a 45 day or 60 day lock?"
Dirk Postupack  :  "yes Tim....3/8's on 30 year.......on 3.25%"
Timothy Baron  :  "Really MM? I would have really had to fight the urge to hang up on him/her."

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