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Harry Chriest |
Mortgage News Daily

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MBS RECAP: Weaker To Start, Then Defensive Ahead Of FOMC
Posted to: MBS Commentary
Tuesday, December 11, 2012 4:05 PM

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MBS Live: MBS Afternoon Market Summary
As far as domestic trading hours were concerned, today was even flatter than yesterday's exceptionally well-contained session for both MBS and Treasuries.  That said, both sides of the market began in weaker territory owing to a "take your pick" assortment of European market movers with Germany's much better than expected ZEW survey being the standout.  Other European events contributed to a general "risk-on" move into the domestic session with news that Greece had reached their target amount for a required debt buyback overshadowing domestic data in the morning.  Later in the session, we'd learn that the prices agreed to in that buyback were high enough to put Greece 2% and change over the limit for their 2020 debt-to-GDP target (but what's a few hundred million Euros among friends?).  That news may have helped reinforce the support that Treasuries and MBS were already seeing.  Additionally, Boehner and Reid broke out the banjos for quick duel, to the tune of "Gettin Nuttin' For Christmas."  Indeed, Fiscal Cliff headlines continue to be "nuttin' but bad," both in the sense that they aren't speaking to progress and that they're utterly devoid of substance.  The bigger preoccupation, in lieu of catchier Fiscal Cliff tunes, is tomorrow's FOMC Announcement--important in that it SHOULD more clearly spell out the way in which the Fed will continue buying Treasuries in 2013.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
104-28 : -0-04
FNMA 3.5
106-17 : -0-03
FNMA 4.0
107-02 : -0-03
FNMA 4.5
107-26 : -0-02
GNMA 3.0
106-10 : -0-04
GNMA 3.5
108-17 : -0-02
GNMA 4.0
109-10 : -0-04
GNMA 4.5
109-06 : -0-01
FHLMC 3.0
104-18 : -0-04
FHLMC 3.5
106-04 : -0-07
FHLMC 4.0
106-17 : -0-02
FHLMC 4.5
106-31 : -0-01
Pricing as of 4:05 PM EST
Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.

3:30PM  :  Late Stock Slide Helps Bonds, Reprices Unlikely But Possible
MBS just inched into their highs of the day with Fannie 3.0s down only 1 tick at 104-31+. There's little to lean on by way of market movers apart from Senator Reid saying it will be hard to reach a deal on the Fiscal Cliff before Christmas.

If that's our market mover, markets paid it almost no mind for at least 5 minutes after it hit the wires (that's uncommon). Whatever the case, stocks began to slide shortly thereafter, and are currently within a few S&P points of opening levels--8 points from mid-day highs.

10yr Treasury yields stepped back from their ledge in the mid 1.65's and moved to mid 1.64's. Riveting...

Bottom line, there's a small, lingering possibility that we'd see a positive reprice or two, due more to the microscopically positive stability rather than empirical improvements in prices. Qualitative > Quantitative. It has been known to happen, but we wouldn't plan on it. Tomorrow's FOMC announcement continues to keep trading ranges compressed.
1:21PM  :  Auction Undetectable, Sideways Grind Continues
MBS prices are at the same levels as the morning update and haven't strayed more than 2 ticks in either direction since then. The 3yr auction was exactly as expected in terms of yield (.327) and much weaker-than-average in terms of bid-to-cover (3.36 vs 3.71 recent average). Also exactly as expected was the auction's inability to suggest any response in the realm of longer Treasury maturities, let alone production MBS.

10yr yields leveled off earlier this morning after topping out at 1.658 and with few exceptions, have traded between there and 1.648--a 0.01% range for almost 4 hours now... 10's are currently at 1.654 while stocks are having their best day in a while with S&Ps up over 15 points. Fannie 3.0s are down only 4 ticks (post-roll) at 104-28.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Jeff Anderson  :  "REPRICE: 3:02 PM - Chase Better"
Jay Rafuse  :  "Harry Reid says no deal...lets see some green!"
Matthew Graham  :  "now we're 2 for 2 on "Nothing New™" from both sides of the aisle today."
Matthew Graham  :  "RTRS- TOP U.S. SENATE DEMOCRAT HARRY REID SAYS IT WILL BE HARD TO REACH A FISCAL CLIFF DEAL BY CHRISTMAS "
Victor Burek  :  "you only have to on govt loans in community property states..dont have to on conventional"
Scott Valins  :  "on a CA purchase conventional do we have to count non-borrowing spouse's debt towards DTI?"
Matthew Graham  :  "but we might hear it here: RTRS- U.S. HOUSE SPEAKER BOEHNER EXPECTED TO GIVE UPDATE ON FISCAL CLIFF TALKS AT APPROX. 12:00 NOON ET ON HOUSE FLOOR "
Matthew Graham  :  "I doubt we'll see the words "fiscal cliff" pop up in the actual text of the announcement."
Brett Boyke  :  "we have roughly $45B in monthly twist buying ending"
Jason Wilborn  :  "the fed stands at the ready to avert..... type stuff"
Jason Wilborn  :  "with Fiscal cliff verbiage tied in"
Jason Wilborn  :  "it'll be bigger than that BB I think"
Brett Boyke  :  "so we are looking for Twist extension/replacement rhetoric?"

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