MBSonMND: MBS RECAP
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Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard
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3:58PM :
BEWARE: Today is Class A Notification Day
March Fannie and Freddie 30 year fixed MBS coupon have begun the settlement process and it will soon look like MBS prices just plummeted (more than they already did today).
Why? Today is Class A Notification Day in the secondary mortgage market. Class A MBS coupons consist of Fannie Mae and Freddie Mac 30 year loan notes. READ HOW THIS IMPACTS LOAN PRICING....
3:40PM :
Loan Pricing Update: 3/8/2011
C30 loan pricing was a modest 8bps worse on average this morning before reprices for the worse were reported. Afterward, rebate is 33bps worse on average among the five major lenders. The extra 25bp hit to pricing matches up to the prices declines seen in the FNCL 4.5 MBS coupon. Best Execution is still 4.875% on C30 paper and 4.75% on FHA/VA 30-year fixed.
3:40PM :
New MBS Commentary Post
2:44PM :
Bonds Trudge Back From Weakest Levels of the Day
FNCL 4.5's were able to stem their losses at 101-20, and now sit at 101-22. These price movements form a triangle coming off those lows of the day when combined with the series of lower highs seen from the 9am hour to now. This will resolve itself shortly to the upside or downside and thus give whichever trend prevails a bit of validity heading into the PM hours. 10yr notes are at 3.542
2:16PM :
New MBS Commentary Post
1:48PM :
MBS Outperform But Lack Directional Support of Benchmarks
FNCL 4.5s are 4/32 off their intraday low prints but aren't getting much directional support from TSYs and swaps. We need that directional support if "rate sheet influential" MBS coupon prices are to make a sustained run higher today. Unfortunately, with $21billion 10s on the auction block tomorrow and an empty data calendar ahead...there just isn't much reason to get excited about buying bonds right now. So we "wait and see" if the flight to safety gains momentum or stalls out. Right now the trend in oil prices and stocks is our friend, but it's gonna take another push through 3.40% range resistance and a test of 3.31% in 10s before we see a significant improvement in loan pricing. The MBS paper shuffle continues until then...it's a day trader's delight.
1:48PM :
ALERT:
Bonds Getting Weaker Again, Treasuries At A Quicker Pace Than MBS
10yr notes just backed up to what are effectively the high yields of the day at 3.55. Relative to the pace of that movement, MBS prices have not retraced to their weakest levels of the day at 101-19. FNCL 4.5's are currently at 101-22, and have not followed the same relatively abrupt selling pattern seen in treasuries at the moment. We caution, however, that illiquidity of front-month coupons could be affecting the correlation between MBS and treasuries at the moment, so stay on your guard to potential changes in MBS on this weakness. Nearing those 101-19 lows increases risks of reprices for the worse.
1:22PM :
Initial Reaction To Auction Is Slightly Positive For Bonds
FNCL 4.5's have added 3 ticks since the 1pm auction, bringing prices up from 101-19 to 101-22. 10yr notes initially moved down to 3.538 where they met some resistance. After getting a supportive bounce at 3.546, yields are currently in the process of testing and breaking that initial resistance and are currently at 3.535. Conclusion: we're pretty much in "so far so good" territory after this one... No major motivation to recapture morning highs is evident yet, but neither does there seem to be motivation for a sell-off. If post-auction momentum continues or builds even slightly, reprices for the better could make an appearance.
1:08PM :
New MBS Commentary Post
1:04PM :
DATA FLASH: 3 Yr Note Auction Slightly Lower Than When-Issued
U.S. SELLS $32 BLN 3-YEAR NOTES AT HIGH YIELD 1.298 PCT, AWARDS 31.72 PCT OF BIDS AT HIGH *** U.S. 3-YEAR NOTES BID-TO-COVER RATIO 3.22, NON-COMP BIDS $60.05 MLN *** US TREASURY - PRIMARY DEALERS TAKE $17.00 BLN OF 3-YEAR NOTES SALE, INDIRECT $10.96 BLN *** 1pm When-Issued yields at 1.308
12:04PM :
Bonds Continue To Weaken. Reprices For The Worse Reported
Stocks are soaring today as oil looks to be meeting resistance at yesterday's afternoon levels. The S&P is up from 1310 to 1325. 10yr notes are fighting to hold support at 3.55 and FNCL 4.5's are down 6 ticks at 101-20. A few reprices for the worse have been seen, and more may follow, especially from lenders who priced earlier in the day.
11:21AM :
ALERT:
Reprices for Worse Possible as MBS Hit New Intraday Lows
Lenders who released loan pricing early in the session and have not yet repriced for the worse are now likely to do so as the FNCL 4.5 MBS coupon has fallen to new intraday price lows.
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard
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Edgar : "Stocks may not have a choice in the matter if the middle east continues to cause problems. Take away that issue, I still think stocks go lower over time (3-4 months) with or without 120-150$ oil: QE2 ending, margin squeeze, underemployment, political gridlock at the state/local level, and an overbought/expensive market."
Edgar : "looks like we're losing some strength. Want confirmation that the stock market is ready to reverse course in a major way? Read the AP headline that is out: "2 years after market low, the little guy is back".....kiss of death for stocks. "
Victor Burek : "stocks moving off their highs... maybe mbs get some love"
Adam Quinones : "so..as a hedge for higher rates, ARM rates tend to outperform fixed rates."
Adam Quinones : "so...as benchmark rates rise and more investors look to lock in their borrowing costs at current levels, it helps swap spreads tighten "
Adam Quinones : "when rates rise on a consistent basis, more folks want to lock in at current market to avoid paying higher rates later"
Adam Quinones : "A 7/1 ARM loan is basically a 7year fixed rate vs. 23 year floating rate swap contract "
Adam Quinones : "ARMs based on swap curve. Think of a swap curve as such..."
Sunny Singh : " rebate. sorry I hit enter on accident. Is there a correlation"
Sunny Singh : "Hey Matt, quick question: I was always told that ARM pricing improves when FRM pricing worsens. I dont sell a lot of ARMS, maybe 1 per year these days, but I have a borrower right now who I got the clear to close on and its a HIGH Balance ARM at 3.875 with
Chris Kopec : "Thanks MG....this does make sense. I had a general idea, but the additional explanation helps a bit to provide context."
Tom Bartlett : "Great explanation MG. Thanks."
Matthew Graham : "I really hope that makes all kinds of sense... and PLEASE let me know if it doesn't"
Matthew Graham : "but only doing either in small incremental amounts as far as the intraday activity is concerned"
Matthew Graham : "if it holds as support, I will increase that same significance"
Matthew Graham : "has been tested for support a few times in recent moments, and with 10's at 3.5384 currently very much tested. "
Matthew Graham : "and now we're seeing that same resistance level acting as a pivot point after it was broken"
Matthew Graham : "I'm purposely not drawing on past precedent before today in this conversation because I want to communicate that we can see and refer to peaks and valleys as support and resistance simply from looking at their intraday movements like this"
Matthew Graham : "because we had established a track record that this yield was a bit tricky to rally through 2 times in a row now"
Matthew Graham : "as soon as it bounced there again, it became "resistance" in my mind"
Matthew Graham : "the most prominent low during that time is at 3.538."
Matthew Graham : "in this case, we see the 10yr chart between 11:11 AM and just after the auction"
Matthew Graham : "but ideally, you'll have some past precedent, trend, or technical indication that it's more than just a serendipitous "bounce""
Matthew Graham : "naturally, the more prominent the high or low, the better the case is to refer to it as resistance"
Matthew Graham : "any time MBS make a "high" in price or treasuries make a "low" in yield and start heading back into weaker territory, it can be referred to as "resistance""
Matthew Graham : "sure Chris"
Chris Kopec : "MG.....regarding resistance, I'd welcome some additional remarks. "
Matthew Graham : "yes Chris... that's the extent of it... "
Matthew Graham : "same resistance breakage showing up in MBS as well"
Matthew Graham : "nice.... prodding through resistance level now"
Matthew Graham : "ouch, resistance bounce in 10's"
Adam Quinones : "decent auction...still leaning on dealers a bit too much though."
Adam Quinones : "3.22 bid to cover above average."
Bernie : "PHH reprice"
Chris Kopec : "5/3 reprice"
Edgar : "SunTrust just announce a reprice"
Matthew Graham : "but the losses happened earlier enough that it just seemed like rate sheets came out a bit later than normal"
Matthew Graham : "haven't seen any come across"
Victor Burek : "none here"
Tony Cardinal : "anybody get any reprices, yet?"
Aaron Meyer : "my pricing has lost .2362 bps since open"
Adam Quinones : "the broader rally is yet to be confirmed though so it could also be a sign of unwillingness to push yields lower."
Adam Quinones : "no im saying the market isnt too interested in rally in the short run with auction supply just ahead. right now this is a normal push back."
Jeff Anderson : "Emphasis on "Should"."
Jeff Anderson : "Are you saying the auctions should go well?"
Jeff Anderson : "Morning Team. AQ, what exactly did you mean with "the level of nervousness is however soothed a bit in the fact that we have auction supply ahead and a market that is looking for a concession
3/8/11 11:22AM
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Adam Quinones : "there is your GUTFLOP GUIDANCE"
Adam Quinones : "Lenders have moved the Best Execution 30-year fixed note rate as low as they possibly can without drastically altering their pipeline hedging strategies. This is a factor of what production mortgage-backed security coupon is most liquid in the secondary mortgage market. On conventional loans, the 4.50 percent MBS coupon is the hedging vehicle of choice for lock desks. Home loans with note rates between 4.875 and 5.25% are generally used to fill 4.50 percent MBS coupon trades. Until MBS investo"
Adam Quinones : "Mortgage Pricing Hits Wall. Loan Demand Declines : http://www.mortgagenewsdaily.com/03022011_mba_applications.asp"
Adam Quinones : "NEW GUIDANCE: No Change. Same as Friday. "Current Market" is as good as it gets for at least the next week. We are encouraged by the behavior of the bond market but remain defensive."
MBS Market Alerts
