MBS trading flows are minimal with only infrequent and irregular interest from originators looking to protect their diminutive pipelines from interest rate risk. On the bright side MBS coupon prices are strolling about a wider range today... after yesterdays 3 tick trading range, a 5 tick variety today seems like a roller coaster ride doesnt it? WOOOOO!!! (please note sarcasm).
Par-nertia is STRONG!!!
Since 5 pm "Going Out" Marks....
FN30________________________________
FN 4.0 -------->>>> +0-03 to 100-00 from 99-29
FN 4.5 -------->>>> +0-02 to 101-26 from 101-24
FN 5.0 -------->>>> +0-03 to 102-27 from 102-24
FN 5.5 -------->>>> +0-02 to 103-21 from 103-19
FN 6.0 -------->>>> +0-02 to 104-26 from 104-24
GN30________________________________
GN 4.0 -------->>>> +0-04 to 99-30 from 99-26
GN 4.5 -------->>>> +0-02 to 101-29 from 101-27
GN 5.0 -------->>>> +0-00 to 103-14 from 103-14
GN 5.5 -------->>>> +0-01 to 104-03 from 104-02
GN 6.0 -------->>>> -0-01 to 104-21 from 104-22
UST10YR: +0-00 yielding 3.25%
2s/10s: 238.99 bps
Dow: +57 to 8531
Treasury trading action picked up as prices of the 10 yr note moved over 99-06 and the yield neared 3.22% (take your profits before someone else does)...but the 10yr is having a difficult time mustering the momentum to move too far from 3.25%. Short term technical range trading illustrated....
The Fed's presence had something to do with this activity "perk up" though. This morning the Fed's Open Market Operations account purchased $7.699bn in TSY coupons maturing from 2016 to 2019. Here is a screenshot of what they purchased...
MBS watchers should take note of what the Fed is buying because today's OMO purchase is a direct attempt to keep mortgage rates low. Out of all the open market Treasury purchases the Fed has conducted thus far, the maturities influencing mortgage rates have seen, by far, the highest spending relative to the rest of the yield curve. Today's $7.699bn buy is a pleasant "HI WE ARE STILL HERE TO KEEP MORTGAGE RATES LOW " message...but I dont believe it is enough to snap fixed income buyers out of their range bound mood. Treasury traders need a real "HEY!!! WE ARE KEEPING MORTGAGE RATES LOW!!!!" type of purchase (or bully pulpit communication)....oh well I am not complaining because mortgage rates are still low but it would help.
Since the Fed' s OMO purchases, TSY market trading has been mixed with the overall bias remaining defensive/bearish. Buyers are currently matching sellers but that changes hour to hour as the value of the dollar index tests 4 month lows. Here is the USD/EUR pair...
From a rate sheet perspective the Fed provided super liquid "rate sheet influential" trading environment is helpful in terms of getting free rate lock extensions and even cheaper rate lock renegotiations. Bigger lenders may be more reluctant to do so on a loan by loan basis but you should know that when they go to sell their pools of loans (up the supply chain)....their leeway is a little more lax regarding renegotiations because of the Fed's presence at the top of the supply chain(MBS). Furthermore lenders are definitely paying for reliability...if you are a seller of size (economies of scale) and not leaning on your funding source for a little more latitude...you probably could be!!! For smaller lenders and brokers...flipping locks and ruining your pull through will keep your rate sheet status at a bare bones status (no incentives)...but what choice do you have at this point? Do your best to gain your lender's trust and your rate sheets will be noticeably better...
Markets are currently listening to Treasury Secretary TIMMMAAAY get a good talking to from Chairman Dodd's Senate Banking Commitee plus the information pouring out of the White House where President Obama is meeting with his economic advisors. The big "to do" is that President Obama is super focused on job creation and the US's role in the upcoming boom of "green products". Not much reaction thus far but stocks appear to be under pressure wanting to move lower....
MBS Market Alerts
