MBSonMND: MBS MID-DAY
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FNMA 3.5
92-13 : +0-01
FNMA 4.0
96-18 : +0-04
FNMA 4.5
100-03 : +0-04
FNMA 5.0
103-05 : +0-05
GNMA 3.5
93-07 : +0-02
GNMA 4.0
97-29 : +0-04
GNMA 4.5
101-09 : +0-04
GNMA 5.0
104-12 : +0-04
FHLMC 3.5
92-06 : -0-01
FHLMC 4.0
96-14 : +0-05
FHLMC 4.5
99-31 : +0-04
FHLMC 5.0
102-30 : +0-06
Pricing as of 11:02 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
ALERT11:01AM: MBS Fall From Highs, No Reprices Reported Yet
Since 10:15am, MBS have fallen 7 ticks from a 100-10 peak, now down to 100-03. It really depends on how edgy lenders are ahead of the 1pm auction, but this could be enough of a loss to see a reprice for the worse, although we haven't seen any yet. The underlying trend in 10yr notes is disturbing, but not unexpected (auction concession). 10's just broke through some implied support from a recent bounce at 3.725. Not good. If this weakness persists, reprices for the worse will become increasingly likely.
10:56AM  :  Bernanke on Government Mortgage Finance Guarantees
RTRS-BERNANKE - IF GOVERNMENT PROVIDES CREDIT GUARANTEES FOR MORTGAGE FINANCE, SHOULD BE ONLY AS A BACKSTOP WHEN MARKET COMES UNDER STRESS
10:27AM  :  MBS Rally To Approach Yesterday's Pre-Roll Levels
FNCL 4.5's are up 9 ticks so far this morning, currently at 100-08. Before the roll yesterday, they had ground into 100-11. 10yr yields have met with support so far this morning in a small band of yields centered on 3.71. The next major data hits at 1pm with the 10yr note auction.
9:59AM  :  Short Covering Demonstrates Defensive Bias Before Bernanke
Sellers gained control of the bond market yesterday. This weakened the strength of supportive roadblocks and allowed benchmark yields to drift higher than they might have in a more balanced trading environment. It appears fast$ short sellers have recognized this observation as well and are now taking advantage of it by covering their short positions, which effectively books a profit on a bearish tactical bias. This is a rational move ahead of Fed Chairman Ben Bernanke's first visit to the now Republican-led House Budget Committee. Ben Bernanke vs. Paul Ryan. Cost Push Inflation vs. Demand Pull Inflation. The Budget Deficit! This is gonna be good! 10AM on CSPAN. We are indeed seeing position squaring in the form of short covering in the "Rate Sheet Influential" belly of the yield curve. While not a sign of outright optimism for 3.70% support, this behavior does imply short sellers are naturally nervous about leaving profits on the table for too long. We're indirectly encouraged by this but by no means are we excited. Snowball selling is still just around the corner. We must hold near current levels or we fear more pain will play out in loan pricing.
9:02AM  :  Highlights From Geithner Speech
UNEMPLOYMENT WILL COME DOWN MORE GRADUALLY THAN HE WOULD LIKE *** U.S. ECONOMY GETTING STRONGER, BUSINESSES GETTING MORE CONFIDENT *** GOVT NEEDS TO CREATE BETTER ENVIRONMENT FOR BUSINESSES TO ACT WITH CONFIDENCE *** HIGH TECH, MANUFACTURING, EXPORT SECTORSS LOOK STRONG ACROSS THE BOARD *** OBAMA ADMINISTRATION WON'T LOOK AT TAX HOLIDAY FOR REPATRIATED EARNINGS OUTSIDE OF BROAD TAX REFORM *** OBAMA ADMINISTRATION BUDGET PLAN WILL HAVE DETAILED PROPOSAL TO BRING DOWN DEFICIT
8:47AM  :  Bond Market Teetering on Snowball Selling Event
Snowballing selling is a liquidative "duration shedding" phenomenon associated with extension risk in the bond market. Snowballing matters because it leads loan pricing sharply lower and pressures the "Best Execution" 30 year fixed mortgage rate rapidly higher. Snowballing selling is what we witnessed in early December. We haven't seen snowball selling in the post range break run up but we're definitely teetering on such a move. Hedgers are preparing by selling benchmark Treasuries and buying protective options. An avalanche of "duration shedding" would surely push the "Best Execution" 30 year fixed mortgage rate up to 5.25-5.375%....and it would happen in the blink of an eye. READ THE POST BELOW FOR A BETTER EXPLANATION
8:40AM  :  Treasuries and MBS Rally Slightly Overnight
So far this morning both MBS and benchmark 10's are moderately improved. FNCL 4.5's are currently up 5 ticks to 100-05 (March coupons), and 10yr yields are down almost 4 bps to 3.701. This may help ease the pain that was delivered via numerous reprices for the worse yesterday, but don't expect anything too aggressive, either from underlying markets, or from rate sheets considering the 10yr auction at 1pm.
8:23AM  :  DATA: MBA Applications Drop As Rates Reach 10 Month High.
MORTGAGE MARKET INDEX DECREASES 5.5 PCT TO 464.7 IN WEEK ENDED FEB 4 *** MORTGAGE MARKET INDEX DECREASES 5.5 PCT TO 464.7 IN WEEK ENDED FEB 4 *** REFINANCING INDEX FALLS 7.7 PCT TO 2086.4 IN FEB 4 WEEK *** AVERAGE 30-YEAR MORTGAGE RATE INCREASES 32 BPS TO 5.13 PCT IN FEB 4 WEEK

Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Adam Quinones  :  "thought you might say that..."
Steven Stone  :  "but what good is high pull through on 1/10th of the volume lol"
Steven Stone  :  "pretty good"
Adam Quinones  :  "Steven Stone how's pull-through?"
Adam Quinones  :  "..hanging over our heads."
Bert Swyers  :  "snowball coming?"
Steven Stone  :  "but if you do a 30k / year job...you should make 30k per year"
Steven Stone  :  "everyone wants to make 100k a year...even if they are unskilled and uneducated"
Bobby Kurpinsky  :  "I'll have to dig up the article but he was talking about how technology would take over and part of the american work force would become non existent"
Robert Rippy  :  "Not that I am for what I am fixing to say but, I think we would be better off if the government subsidized some non-skilled manufacturing in the amount equal to the employees taxes. That would encourage business to begin producing a product and would atleast creat wages that could in turn purchase products."
Adam Quinones  :  "see how it all goes full circle?"
Adam Quinones  :  "just not easy to implement with budget deficit so large"
Adam Quinones  :  "i think they get it."
Robert Rippy  :  "Simple economics that Washington does not understand!"
Robert Rippy  :  "Here is the problem we face inthe US. We have exported our much of our unskilled labor to other countries so we have basically stopped producing alot in the US. We are shifting to technology which takes educated/skilled labor. Our education in the US continues to drop compared to the rest of the world. SO, we don't have jobs for those being laid off because many are not highly skilled and we are looking at creating positions that require the highly skilled."
Adam Quinones  :  "an economist would say "the opportunity cost of rest grows rapidly as humans get tired""
Terry Colabrese  :  "Ahh.... I see. Thanks! We are human and only capable of just so much before we do break. I agree with that! "
Adam Quinones  :  "which is in question...UNCERTAINTY!"
Adam Quinones  :  "...that assumes demand is growing sustainably Terry"
Terry Colabrese  :  "if an employer has high productivity with the employees he has now, and can cover production, why add any additional employees?"
Adam Quinones  :  "HUMANS are only capable of producing so much in an hour work before they tire. Robots and automation on the other hand have an on/off switch and do not get tired. Many economists are overlooking investments in technology as a harbinger for unskilled laborers. "
Adam Quinones  :  "usually implies firms will be forced to ramp up hiring to keep up with consumer demand"
Adam Quinones  :  "no it is not"
Terry Colabrese  :  "AQ, isn't it elementary understanding for econ 101 that high productivity means less hiring?"
Adam Quinones  :  "yes well consumers don't exactly know what's good for them when it comes to the nitty-gritty parts of the loan process...and politicians are listening to them. The Fed seems to have their stuff together on that though, they are your only hope for protection Owl."
Chris Kopec  :  "Reading the MBS updates on Geithner's speech, referring to "creating better environments for businesses to act with confidence".....I'm left with the opinion that politicians simply don't count mortgage originators as businessmen, because nothing I've seen in the past 3 years has been remotely positive for the mortgage businessman or their clients."
Bobby Kurpinsky  :  "MND should count for nmls education requirements"
Mike Drews  :  "Obviously MBSonMND has benefits beyond $$, but I would venture to say that my abilty to capitalize on short term lock decisions has made me an additional 10-15k last year."
Adam Quinones  :  "...imagine how that impacts an entire year of short-term decisions"
Adam Quinones  :  "im glad the tool paid off for you Jeff."
Jeff Buchweitz  :  "AQ - you saved me money yesterday; locked 3 before bottom fell out...thanks boys"
Adam Quinones  :  "closing short positions means less resistance into a rally"
Adam Quinones  :  "short covering = profit taking to close a short position"
Adam Quinones  :  "a rally Andy"
Adam Quinones  :  "seeing some short covering BEFORE the 10 year note auction. That implies the latest run up was a function of pre-auction concessions and the market is setting itself up for a potential move in the other direction."
Adam Quinones  :  "http://www.charlierose.com/view/interview/11438"
Adam Quinones  :  "i listened to Timmy G speak in Davos...he was incredibly forthcoming and honest"
Ira Selwin  :  "The full article I quoted is: http://money.cnn.com/2011/02/09/news/economy/fannie_freddie_phase_out/index.htm?source=cnn_bin&hpt=Sbin"
Adam Quinones  :  "The Obama Administration is expected to release some sort of announcement on the future of housing finance this week. MND expects the Administration to present a few potential pathways towards reform, but no concrete guidance. The Adminstration has communcated a clear intention to lessen the mortgage market's reliance on government backed financing. To accomplish that goal the Administration will encourage private investors to re-liquidate the non-agency secondary market. This is another step in"
Adam Quinones  :  "Bernanke battles misaligned inflationary fears and budget deficit threats from Paul Ryan today. I bet he dances all over Congressman Ryan. He is well-spoken and calm under pressure. "
Ira Selwin  :  "...The three options in the administration's white paper were outlined in published reports Wednesday...The most conservative of the three options would involve no government role in the mortgage market beyond existing federal agencies, such as the Federal Housing Administration, according to the Wall Street Journal. The two other options relate to the government's place in the secondary mortgage market, previously filled by Fannie and Freddie. "
Adam Quinones  :  "Fed Funds well anchored regardless of herding in the futures market"
Adam Quinones  :  "fortunately I think the steep shape of the curve will prohibit a sustained move higher"
Adam Quinones  :  "this is hedgers preparing for a potential snowball event...."
Adam Quinones  :  "HEAVY HEAVY traffic in mtge options space"
Adam Quinones  :  "60/40 flows into 5.0s vs. 4.5s yesterday"
Adam Quinones  :  "Treasury yields weakened overnight with the benchmark 10-year note trading in a range between 3.71% to 3.77%, versus the Tuesday close at 3.72%. Treasuries have weakened in the past seven sessions as money continues to flow into equities. Analysts at Thomson Reuters called the weakening “sensible enough” considering the 10-year auction at 1pm today. "We have yet to see all out snowball selling in the bond market but we've definitely noticed hedgers preparing for a potential shift in duration bi"
Adam Quinones  :  "what you saw yesterday was the beginnings of snowball selling...hedgers were preparing for a potential avalanche"
Adam Quinones  :  "EVENTS * 08:30 Treasury Secretary Geithner on "Finding Work, Finding Our Way" * 10:00 Bernanke testifies on the economy before House Budget Committee * 10:00 House Domestic Monetary Policy Committee on Fed's jobs impact * 10:15 Fed outright Treasury coupon purchase (2/15/2015-7/31/2016) (e: $6-8 bln) * 14:00 House Financial Services (Cap Mkts Sub-Cmte) hearing on GSE reform * 17:45 FRB New York's Sack on implementing the Fed's asset purchase program * 18:45 FRB Atlanta's Lockhart on the economy "
Adam Quinones  :  "when you hear me saying "lower and wider" you'll know it's coming or already happening"