MBSonMND: MBS RECAP
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Pricing as of 4:04 PM EST |
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard
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3:59PM :
ALERT:
Reprices For The Worse Possible as MBS Fade
Late day illiquidity and a stock market rally are weighing on MBS this afternoon. Prices are in line with their lows of the day and while the reprice scene has been fairly quiet today, it's not out of the realm of possibility for a lender or two to take some rebate off the table heading into the weekend. Fannie 3.5's are down 12 ticks on the day at 100-22 and 4.0's are down 8 ticks at 103-03.
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard
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Matthew Graham : " (Reuters) - The U.S. Treasury Department said it would delay until later this year a ruling due on Saturday on whether China was manipulating its currency to gain an unfair trade advantage."
Matthew Graham : "yes. seems like we agree that "change" is certain, but what form it will take is not"
Gaius Rossini : "the question is whether we'll see it completely break... i gave up hope of any fix long ago"
Chris Kopec : "Sorry, offline a bit. To clarify my point....Fannie/Freddie aren't going anyway without the creation of a new framework to replace them, including implicit government support."
Gaius Rossini : "no idea if it's accurate, politically impossible, lots of issues, but if true, then a possibility"
Gaius Rossini : "HERA allowed the Treasury Department authority to purchase preferred shares of the GSEs, and this forms the basis of the preferred stock purchase agreements between the Treasury department and Fannie/Freddie. At end-2012, the capital becomes limited, and depending on how the economy goes, could be depleted within 10 years. Perhaps more importantly, HERA also specifies that the Treasury's preferred share purchases must be contingent upon several important factors including the probability of the "
Gaius Rossini : "This is copied from a BoA piece"
Andy Pada : "Agreed there will be changes; mabe even a million little paper cuts of changes, but we live in a busted world wherein we are band-aid afficionados. I find it hard to believe we will raze an entire part of our political social contract."
Matthew Graham : "surely. and i agree with you. but whatever happens to them, they're not staying the same"
Andy Pada : "I think the last line beginning with "lawmakers" is the key point."
Matthew Graham : ""In any event, the model on which they were built is broken beyond repair. Conservatorship allows the Enterprises to continue serving their public purpose while lawmakers determine the ultimate resolution of the conservatorships and the future legal structure for housing finance.""
Matthew Graham : ""It ought to be clear to everyone at this point, given the Enterprises’ losses since being placed into conservatorship and the terms of the Treasury’s financial support agreements, that the Enterprises will not be able to earn their way back to a condition that allows them to emerge from conservatorship.""
Andy Pada : "to me DeMarco is the wild card; he is the captain of a sinking ship, but he doesn't get to decide whether or not fix the ship or not"
Matthew Graham : "CK, demarco says it's a foregone conclusion"
Chris Kopec : "For all the posturing, I don't think Congress would ever be that stupid."
Andy Pada : "doesn't getting rid of Fannie/Freddie require an act of Congress? Is that ever going to happen?"
Matthew Graham : "if someone waved a magic wand and made Fannie/Freddie sustainable into the future and profitable without taxpayer money, I suppose we'd see how much spread widening we could chalk up to their probable disappearance"
Matthew Graham : "in other words, some of the "higher rates" is already built in but I couldn't tell you exactly how much."
Matthew Graham : "The realization that Fannie/Freddie are, at some point in the future, not going to be around, is very likely a component in the gradual widening of spreads seen leading up to Operation Twist (in conjunction with the natural widening during a flight to safety which accounts for the majority of the widening)"
Matthew Graham : "I think higher rates are the implication. part of that comes from not having a g-fee though, but that's only .125-ish"
Andrew Russell : "where does the higher return come from? rates go up?"
Andrew Russell : "MG, what is the conclusion on the "spread risk in mortgage bonds"...is that good or bad?"