This morning originators hedged their pipeline and locked in returns by selling forward commitments. (Read more HERE for a better understanding). This added supply of available for bid 4.0 and 4.5 pools was initially offset by the Fed and even some real money buyers. Unfortunately the already pricey premium prices makes it hard for the stack to sustain a bid (bc of mucho prepayment uncertainty)...since the buying at the open prices have pushed lower. The Fed does however remain a supportive influence over the MBS markets, plus, as expected, buyers have continued to emerge when prices get cheaper. This gives us a feeling of encouragement that the trading range will remain tight...
Fn 4.0-> -0-02 to 100-22+ Gn 4.0-> +0-01 at 101-03
Fn 4.5-> -0-02+ to 102-01+ Gn 4.5-> -0-01+ to 102-24
Fn 5.0-> -0-02 to 102-28 Gn 5.0-> -0-01 to 103-17
Fn 5.5-> -0-03 to 103-08+ Gn 5.5-> -0-00+ to 103-24+
Fn 6.0-> -0-01 to 103-23+ Gn 6.0-> +0-02 to 103-30+
Remember we have warned that one of the roadblocks to lower rates is a normal function of the TBA MBS market...originator selling/profit taking! These pockets of selling provide a good buying opportunity for MBS bidders. HOWEVER as we noted in last nights blog post...we feel like the stack is stuck. While the primary mortgage market works out its operational inefficiencies, market participants will find it hard to craft a commitment to any specific coupon. So for the time being we expect 4.0s and 4.5s to struggle to make headway....Matt and I anticipate a tight trading range until lenders make a move that triggers a broad based refi boom.
Guess what? Yesterday we forgot to give you the MBA Weekly Application Activity Press Release! Sorry about that here is the pertinent info...
"The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending January 9, 2009.
The Refinance Index increased 25.6 percent to 7414.1 from 5904.5 the previous week and the seasonally adjusted Purchase Index decreased 14.1 percent to 295.8 from 344.2 one week earlier. The Refinance Index is at its highest level since the week ending June 27, 2003, when it was 8599.1.
The seasonally adjusted Conventional Purchase Index decreased 10.3 percent while the Government Purchase Index (largely FHA) decreased 21.8 percent.
The four week moving average for the seasonally adjusted Market Index is up 10.8 percent. The four week moving average is up 0.8 percent for the seasonally adjusted Purchase Index, while this average is up 13.8 percent for the Refinance Index.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.89 percent from 5.07 percent, with points increasing to 1.20 from 1.16 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The contract rate for 30-year fixed-rate mortgages is the lowest recorded in the survey. The previous low was 4.99 percent for the week ending June 13, 2003."
This morning Freddie Mac announced that the average rate on 30 year fixed mortgage fell 5bps to 4.96% from 5.01%.
MBS Market Alerts
