MBS Live: MBS Afternoon Market Summary
While there's still a bit of time left on the clock, MBS look fairly likely to close at levels that make today the worst day of losses in exactly two months. That's not quite as insidious as it sounds considering we embarked on a very solid rally one day later (Sep 6th jobs report).
Now we're left to consider whether or not the losses of the past 4 sessions are simply a consolidation in a broader uptrend in prices or if we just saw a bounce at longer term range resistance. Both of those options are probably still on the table, but the "onward and upward" eventuality would likely take a fair bit of negativity in the upcoming data.
We'll have to wait until Thursday before we get anything capable of mustering a big enough counterattack, but certainly, this is one of the few pre-NFP Thursday's that's worthy of sharing part of the same spotlight (due to delayed release of GDP as well as the expectations for ECB policy action).
For the record, tomorrow is Wednesday... No significant data. No epic battles on the agenda. There is short term horizontal support (aka "ceiling") at the upper yields of the "shutdown range" in 10yr yields (2.67-ish above and 2.59-ish below), but longer term technicals leave more room for selling. The latter seem most relevant if 10's are moving over 2.67 overnight and tomorrow morning.
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.
3:05PM :
MBS Underperforming, Near Lows; Persistent Reprice Risk
MBS have been generally outperforming Treasuries since July 5th. Even shorter-term trends have been in MBS' favor, such as that seen from the October 22nd jobs report. But Today's intraday trend is very much the opposite.
To put this in perspective, 10yr yields have been holding mostly sideways right around the yields seen in the 60 seconds following this morning's ISM data. If MBS wanted to make it back to their levels from the same time, they'd need to gain a quarter of a point!
Fannie 3.5s are currently moping around the lows of the day, down just over half a point at 101-24. Most lenders interested in repricing have done so, but stragglers could remain.
10yr yields are up 6bps on the day at 2.6623, but off earlier highs of 2.675.
To put this in perspective, 10yr yields have been holding mostly sideways right around the yields seen in the 60 seconds following this morning's ISM data. If MBS wanted to make it back to their levels from the same time, they'd need to gain a quarter of a point!
Fannie 3.5s are currently moping around the lows of the day, down just over half a point at 101-24. Most lenders interested in repricing have done so, but stragglers could remain.
10yr yields are up 6bps on the day at 2.6623, but off earlier highs of 2.675.
11:44AM :
ALERT ISSUED:
Negative Reprices Likely as Selling Momentum Continues
This is in addition to the first round of negative reprices from lenders who priced earlier in the morning. There hasn't been any significant news and no significant events since the 10am ISM data, but tradeflows in MBS have snowballed. Fannie 3.5s are now down 18 ticks on the day at 101-23. 10yr yields are up over 7bps now at 2.6733.
11:32AM :
MBS Alert- Negative Reprice Alert
Losses continuing following ISM beat. Reprices for the worse are to be expected.
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.
Michael Dormer : "Ashley: Not in my experience. Funds verified are funds verified."
Ashley Sanchez : "I have a question about assets at funding. If uw verifies $10k in checking and $10k in savings and $20k is the wire amount does your uw require proof that all money was transferred from the verified accounts to the wired accounts before funding?"
Jon : "It's investor/lender specific. Some lenders require that you have reserves regardless of whether income from the N/O/O is being used to qualify. Other investors even require a certain LTV on OREO. Overlays are the factor here. Best to do your research with your target lenders."
Billy M. Harter : "logic would say yes since he has those obligations and if borrower faced hardship, but I don't see Freddie allregs addressing this...only if conversion to rental or MI or if subject prop is inve or 2nd home"
joon choi : "primary no reserve"
Jason Anker : "sry FNMA would need reseerves, not a freddie shop"
Jason Anker : "i think you need reserve"
Billy M. Harter : "I say no reserves unless lp calls for it...u/w is saying 6 & 6, but I don't see that anywhere..."
Billy M. Harter : "question guys- guy purchasing primary, no mi..has 2 financed invst prop, but is not using rental income. does borrower need any reserves on those other properties? Subject prop is primary, no MI guidelines and no rental income from investment props, nor are they conversions...already had these investments for a while and never occupied..thx"
Ted Rood : "Quick question for the crowd: can a pre 5/2009 endorsed FHA borrower do a reduced MIP stream to a shorter term if net benefit is met?"
Victor Burek : "REPRICE: 12:53 PM - PRMG Worse"
JRS : "REPRICE: 12:43 PM - USBank Worse"
Justin Harward : "REPRICE: 12:24 PM - Great Western Bank Worse"
lhefner : "REPRICE: 12:23 PM - New Penn Financial Worse"
Tom Schwab MLO-77107 : "REPRICE: 12:11 PM - Franklin American Worse"
lhefner : "REPRICE: 12:09 PM - 360 Mortgage Worse"
Gaius Rossini : "doesn't actually have to be sold to the GSEs, just has to be eligible to be sold"
Christopher Stevens : "I am watching 2.71 as next resistence and then 2.74 we are certainly at the high end of that 2.47-2.74 range MG spoke about in yesterdays week ahead commentary."
Clayton Sandy : "Joe, you are correct about the 43%."
Gaius Rossini : "JB - i think this is actually pretty accurate: http://mba.informz.net/MBA/data/images/publicaffairs/preliminary_chart_final_qm_requirements.pdf"
Jon Bodan : "Question - QM has a carve-out until 2021 if the loan meets agency guidelines, correct? the 43% DTI applies to loans that are NOT being sold to Fannie/Freddie or being insured by VA/HUD/USDA."
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