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Mortgage News Daily combines the expertise of some of the housing industry's leading minds with the power of social media to offer an always lively, constantly evolving web community. MND communicates breaking news, streams video, and provides expert opinion and commentary to a community of interested market professionals and curious consumers.MBS CLOSE: Going Out Near The Highs Of The Day
- MBS 4.5's end 4 ticks higher at 101-07
- 10y tsy 2 ticks lower, good for about a bp higher in yield at 3.620
- All 3 major stock indexes within 0.1% of unchanged after morning and mid day gains
- As stocks sold, tsy's rallied 6 ticks and MBS rallied 4.
- Classic "tsy's a bit down, MBS a bit up" kinda day, previously discussed HERE...
- More data tomorrow and a day closer to NFP
- Time to lock?
The afternoon ended as it began for MBS: rallying into consolidation. With the exception of the early morning movements in capitulation to treasuries, stocks, and data, the only real volatile movements for MBS were of the upward variety. And in somewhat of a departure from the norm, those gains merely consolidated and kept on going only to consolidate again in the last few hours near the highs of the day.
[Image or graph removed from email. View full article with images]
Although it's "neat" to see (yet again) plenty of cocktail party conversation material in the 10yr note's penchant to wax inflectional around it's current par value, the more interesting story today is the headiness of pure price in MBS. It's almost as if some sort of Class A settlement (aka "roll") were soon to be upon us, and the soon-to-be-front-month April coupon was at a much more believable 100-27. But these many days before settlement, this is the highest we've seen MBS this year.
[Image or graph removed from email. View full article with images]
As the chart suggests, the bigger issue we face deals with the broader rates market and indeed the market in general as it responds to NFP on Friday. Tomorrow is kind of a wild card. You might win, you might lose, but if lenders are priced remotely close to reality after today's reprices for the better, that card might be too for any deals you're going to lock ahead of NFP anyway. Of some solace is the fact that the market CONTINUES to go more sideways than directional from a day over day standpoint.
To add a definitive recap to previously discussed reasons that MBS outperformed tsy's today, here's the Ninja in his own words on "higher coupon scary... lower coupon not":
"Mortgages
again were more tenuous on the upper stack today and that's good news
for rate
sensitive MBS and I'll relate to you why;
The
inner workings of TBA trades (those not settling anytime in the near
future)
are usually offset by doing the opposite with similar trades also slated
for future settlement. What does all this have to do with
rate-sensitive
secondary and hence primary rates you may ask (go ahead, ask)? In
short, the troubles
brought on future TBA pools of 5.5% thru 7% MBS will be best avoided by
heading
lower in coupon and staying current and more
sound in underwriting with market rate securitized mortgage-backeds. The
pain
felt as 6.5%s were ramped up to almost a near wipeout prepay speeds (100
CPR)
is being soothed and otherwise avoided along 4.5%s-the main "current
coupon"
for all the continental U.S. as worked for by the Federal Reserve-New
York
chapter.
Until
the secondary market is cleaned up of 120+ day delinquency loans and
ultimately
pools, the market will more likely focus its buying in lower and more
credit
worthy 4.5%s where are the timely and credit worthy payers park their
mortgage
borrowings."
More from MND:
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This email was sent to you by:
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Mortgage News Daily
|
 |
Anonymous Anonymous |
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Message:
YOUR MESSAGE HERE
MBS CLOSE: Going Out Near The Highs Of The Day
- MBS 4.5's end 4 ticks higher at 101-07
- 10y tsy 2 ticks lower, good for about a bp higher in yield at 3.620
- All 3 major stock indexes within 0.1% of unchanged after morning and mid day gains
- As stocks sold, tsy's rallied 6 ticks and MBS rallied 4.
- Classic "tsy's a bit down, MBS a bit up" kinda day, previously discussed HERE...
- More data tomorrow and a day closer to NFP
- Time to lock?
The afternoon ended as it began for MBS: rallying into consolidation. With the exception of the early morning movements in capitulation to treasuries, stocks, and data, the only real volatile movements for MBS were of the upward variety. And in somewhat of a departure from the norm, those gains merely consolidated and kept on going only to consolidate again in the last few hours near the highs of the day.
Although it's "neat" to see (yet again) plenty of cocktail party conversation material in the 10yr note's penchant to wax inflectional around it's current par value, the more interesting story today is the headiness of pure price in MBS. It's almost as if some sort of Class A settlement (aka "roll") were soon to be upon us, and the soon-to-be-front-month April coupon was at a much more believable 100-27. But these many days before settlement, this is the highest we've seen MBS this year.
As the chart suggests, the bigger issue we face deals with the broader rates market and indeed the market in general as it responds to NFP on Friday. Tomorrow is kind of a wild card. You might win, you might lose, but if lenders are priced remotely close to reality after today's reprices for the better, that card might be too for any deals you're going to lock ahead of NFP anyway. Of some solace is the fact that the market CONTINUES to go more sideways than directional from a day over day standpoint.
To add a definitive recap to previously discussed reasons that MBS outperformed tsy's today, here's the Ninja in his own words on "higher coupon scary... lower coupon not":
"Mortgages
again were more tenuous on the upper stack today and that's good news
for rate
sensitive MBS and I'll relate to you why;
The
inner workings of TBA trades (those not settling anytime in the near
future)
are usually offset by doing the opposite with similar trades also slated
for future settlement. What does all this have to do with
rate-sensitive
secondary and hence primary rates you may ask (go ahead, ask)? In
short, the troubles
brought on future TBA pools of 5.5% thru 7% MBS will be best avoided by
heading
lower in coupon and staying current and more
sound in underwriting with market rate securitized mortgage-backeds. The
pain
felt as 6.5%s were ramped up to almost a near wipeout prepay speeds (100
CPR)
is being soothed and otherwise avoided along 4.5%s-the main "current
coupon"
for all the continental U.S. as worked for by the Federal Reserve-New
York
chapter.
Until
the secondary market is cleaned up of 120+ day delinquency loans and
ultimately
pools, the market will more likely focus its buying in lower and more
credit
worthy 4.5%s where are the timely and credit worthy payers park their
mortgage
borrowings."
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