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MBS RECAP: Paradoxical GDP Vetted By Internals, FOMC Innocuous, Asleep Till NFP
Posted to: MBS Commentary
Wednesday, January 30, 2013 4:07 PM

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MBS Live: MBS Afternoon Market Summary
It was quite the odd FOMC Announcement day...  Here we were, planning on the week's biggest TWO events being today's FOMC Announcement and Friday's NFP numbers, and GDP, of all things, turns out to be the bigger market mover.  That left the onus on a fairly tepid FOMC Announcement to release the bearish pressure and bring rates back in line with morning levels, which it did.  It's likely, however, that this was more of a "pressure release" than anything, given the fact that the statement itself was actually more economically bullish than the last one, but constituted a bit of a relief as it made no big scary threats on the livelihoods of Treasury or MBS buying.  There was no specific attention paid to the recent notions of early QE conclusions whatsoever.  We didn't expect this in the first place, nor do we imagine many market participants did either, but now that it's confirmed, it was worth a small bounce back to what are still the worst levels in 9 months for Treasuries and since QE3 for MBS.  No celebration yet...  NFP becomes doubly important.   Still scary and uncertain.  Happy Hump Day.
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
103-07 : +0-02
FNMA 3.5
105-12 : +0-02
FNMA 4.0
106-08 : +0-03
FNMA 4.5
107-10 : +0-01
GNMA 3.0
104-08 : +0-02
GNMA 3.5
107-11 : +0-01
GNMA 4.0
108-22 : +0-03
GNMA 4.5
109-03 : +0-01
FHLMC 3.0
102-25 : +0-00
FHLMC 3.5
105-03 : +0-02
FHLMC 4.0
105-31 : +0-02
FHLMC 4.5
106-14 : +0-02
Pricing as of 4:03 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.

3:32PM  :  ALERT ISSUED: Supportive Bounce Off Pre-FOMC Levels. Reprice Potential
While a few lenders have already repriced positively, most have stayed sidelined on what is STILL an extremely muted response to the FOMC Statement. As for the statement itself, it was more economically bullish in parts, removing the indecision as to whether or not economic growth would be able to spur job creation, instead opting to refer to moderate growth leading to gradual declines in unemployment.

This was and still is a potentially perilous distinction for bond markets, though solace is presently derived from the absence of "new, bad news." In other words, there were no changes to how the Fed will be approaching Treasury or MBS purchases. In fact, without reading too much into it, there weren't any material changes at all.

This leaves the near term focus on Friday's NFP as the week's major guidance-giver. The nearer term focus is the absence of auction supply, the presence of scheduled Fed buying, and Month-end balance sheets to account for tomorrow, not to mention the probability of more short-covering helping give the appearance of a positive reaction when not much of a positive reaction is justified.

Regardless of our distrust of the rally, it has held up better into the late afternoon, with MBS and Treasuries both moving back to pre-FOMC levels and bouncing fairly nicely toward the best levels of the day. This says nothing of tomorrow's activity. Things are still very much up in the air. Nothing was resolved here today--frustratingly--but less frustrating is the brief moment of reprieve with a greener color on the screens. Hopefully it doesn't turn out to be an "enjoy it while it lasts" scenario. Even though we don't have material evidence to suggest that is the case, neither could we disprove it beyond a reasonable doubt. Bottom line: don't get complacent here, or at least don't plan on major follow through without support from NFP on Friday morning.
2:47PM  :  FHA TAKES ADDITIONAL STEPS TO BOLSTER CAPITAL RESERVES
As part of a broad effort to strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund), FHA Commissioner Carol Galante announced a series of changes to be issued this week that will allow the agency to better manage risk and further strengthen the health of the MMI Fund.

“These are essential and appropriate measures to manage and protect FHA’s single-family insurance programs” said Galante. “In addition to protecting the MMI Fund, these changes will encourage the return of private capital to the housing market, and make sure FHA remains a vital source of affordable and sustainable mortgage financing for future generations of American homebuyers.”

(Includes Changes to MIPs, HECM, Underwriting , Down Payments on Loans over $625k, and advertising regarding post-foreclosure qualification)
2:23PM  :  ALERT ISSUED: First Moves Are Positive, but Muted. Stay Cautious!
A surprisingly muted response so far to the FOMC Announcement, but a positive one so far. Fannie 3.0s are up 4 ticks on the day now and 10yr yields have fallen to 2.0046. We'd very much prefer to be moving through the 2% level into the 1.9's and for now, are viewing this as a net-negative bounce off pivot-based resistance. Stay Cautious!
2:11PM  :  All Quiet Ahead Of FOMC. Big Potential Energy
5 minutes to go until the FOMC Announcement and we're already in line with the highest volume session of January. Prices have been relatively steady after shaking of the morning weakness at 11am. Fannie 3.0s have traded back and forth around 103-01 and 10yr yields have ground into a ceiling at 2.03 (2.028 currently).

There's never a guarantee that FOMC Announcements will be huge market movers in one direction or another, but there's always the POTENTIAL. There's a chance the statement won't be much changed from previous statements, but if there are notable differences, and if they speak to the timing/continuation of easing either positively or negatively, even the looming NFP on Friday won't prevent big, fast swings.

Lenders know this and will be quicker to reprice if we start tanking. If that's the case, we'll endeavor, as always to get the alert out as quickly as possible, but these are also good times to be paying attention to prices as well, watching for any sort of sustained break below 102-28 in 3.0s and/or above 2.04-ish in 10yr yields. If things happen to break the other way, enjoy the ride.
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.

Ira Selwin  :  "One big impact of the MIP for life of loan is the impact to the APR. Check your loan now, then check the APR if you have MIP for life of loan. "
Ryan Verno  :  "This was just updated on HUD website. http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-010"
Matthew Graham  :  "RTRS- PIMCO'S GROSS SAYS FIRM IS SELLING LONGER-TERM SECURITIES IN RESPONSE TO FED "REFLATION" - CNBC "
Matthew Graham  :  "RTRS- PIMCO'S GROSS SAYS QUANTITATIVE EASING TO SLOW DOWN IN EARLY TO MID 2014 - CNBC "
Scott Valins  :  "REPRICE: 2:32 PM - Icon Wholesale Better"
Matthew Graham  :  "Biggest change is from "committee remains concerned that without sufficient policy accommodations, economic growth might not be strong enough to generate sustained improvement in labor market conditions" TO..... " The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate." "
Tom Schwab  :  "MMG just alerted my colleagues that the market was up 97bps. Useful for a good laugh, and probably some new clients for MBS Live."
Ted Rood  :  "It addresses HECM, but is not limited to that. It just came out, not sure if even listed on website. Came from HUD news "For Immediate Release". This is NOT a joke, I promise"
Scott Valins  :  "reprices coming"
Charles Eriman  :  "hey what happend to the FHA link that was just posted. Want to look up the new MIP #'s/."
Jamall Singh  :  "We still have a lot to make up. Nice move, let this be a start to a huge rally"
Ted Rood  :  "FHA announced the new MIP premiums AND lifetime MIP for new loans minutes ago!"
Brett Boyke  :  "CNBC saying moving towards using UE rate vs calendar to dictate policy"
MMNJ  :  "with the afternoon selloffs in recent days, I think repricings for positive will not happen until sustained levels are held (and later in the day)"
Dena Zeman  :  "i love the color green!"
Andy Pada  :  "this statement makes me feel like they were looking at our chat"
MortgageMan007  :  "man Green is SOOOO much prettier!!!"
Scott Valins  :  "muted response so far. surprised no knee-jerking"
MMNJ  :  "why dies it feel like we haven't been below 2 on the 10 yr in months -- been a harrowing 2 weeks"
Andy Pada  :  "i was literally scratching my head."
Jason Wilborn  :  "head scratching shoule end in about 2 minutes"
MMNJ  :  "cannot remember ever being more excited over +1.....:)"
Steven Stone  :  "well FYI we should start rallying from here...i just hedged the rest of the pipeline"
Matthew Graham  :  "RTRS- FED VOTE IN FAVOR OF POLICY WAS 11-1; GEORGE DISSENTED OVER CONCERNS MONETARY ACCOMMODATION RISKED FUTURE IMBALANCES, COULD LIFT INFLATION EXPECTATIONS "
Matthew Graham  :  "RTRS - FED SAYS EXPECTS HIGHLY ACCOMMODATIVE POLICY WILL REMAIN APPROPRIATE FOR CONSIDERABLE TIME AFTER ASSET PURCHASE PROGRAM ENDS AND ECONOMY STRENGTHENS "
Matthew Graham  :  "RTRS - FED-TO KEEP FED FUNDS 0-0.25 PCT AS LONG AS JOBLESS RATE ABOVE 6.5 PCT, 1-2 YEAR PROJECTED INFLATION NO MORE THAN 2.5 PCT, LONGER-TERM INFLATION EXPECTATIONS WELL ANCHORED "
Matthew Graham  :  "RTRS- FED SAYS ALTHOUGH STRAINS IN GLOBAL FINANCIAL MARKETS HAVE EASED SOMEWHAT, FED CONTINUES TO SEE DOWNSIDE RISKS TO ECONOMIC OUTLOOK "
Christopher Stevens  :  "love it so far"
Matthew Graham  :  "RTRS - FED SAYS GROWTH IN ECONOMIC ACTIVITY PAUSED IN RECENT MONTHS, IN LARGE PART BECAUSE OF WEATHER, OTHER TRANSITORY FACTORS"
Matthew Graham  :  "RTRS- FED SAYS WILL CONTINUE ASSET PURCHASES IF LABOR MARKET OUTLOOK DOES NOT IMPROVE SUBSTANTIALLY "
Matthew Graham  :  "RTRS- FED REPEATS WILL BUY LONGER-TERM TREASURY SECURITIES AT PACE OF $45 BLN A MONTH, AGENCY MBS AT $40 BLN A MONTH "
Victor Burek  :  "santelli gave it a C"
Matthew Graham  :  "yeah OO, another bit of confirmation that no one loves bonds. Shouldn't be too damaging overall, but slightly outside the realm of acceptably weak results given the back-up"
Oliver S. Orlicki  :  "Adding fuel to an already raging fire"
Matthew Graham  :  "D+ in context, expecting C from Santelli"
Matthew Graham  :  "RTRS - PRIMARY DEALERS TAKE $12.19 BLN OF 7-YEAR NOTES SALE, INDIRECT $11.08 BLN "
Matthew Graham  :  "RTRS- U.S. 7-YEAR NOTES BID-TO-COVER RATIO 2.60, NON-COMP BIDS $10.55 MLN "
Matthew Graham  :  "RTRS- U.S. SELLS $29 BLN 7-YEAR NOTES AT HIGH YIELD 1.416 PCT, AWARDS 32.49 PCT OF BIDS AT HIGH "
Brent Borcherding  :  "Thanks, MG, nice setting of expectation/significance."
Matthew Graham  :  "re: 7yr auction: we've only had one out of the last 8 auctions stop through with a lower-than-expected yield. (5 out of 20 in the longer term), Average bid-to-cover: 2.68 (last 4). Above all, 7's may be a longer maturity than 5's, but are a less consequential issuance, and infinitely less consequential than 10's. It's rare to see a marked reaction to 7's even when markets aren't preoccupied with other things, so it would take a big deviation from average stats to cause much of a stir."
Ted Rood  :  "Speaking of Fed statement, looks like an advance draft has been leaked: http://thebasispoint.com/2013/01/29/build-your-own-fed-statement-13013-edition/"
Brett Boyke  :  "CNBC - This Is 'Best-Looking' GDP Drop You'll Ever See"
Ted Rood  :  ""We're NOT Europe, but it we act like Europe, we will be!""
Dan Clifton  :  "yes Rford. i submitted mine weeks ago, still in limbo. i am having to order everything through my sponsoring lenders"
rford  :  "anyone else haveing problems receiving the validation for the new VA security system? I called our Regional Loan Center and they can't do a thing. It's really jacked up how they have an eamil response system only..."
John McClellan  :  "I like to equate this stimulus to Miracle Grow; makes your plants “LOOK” nice and green for a while …then it kills them "
Gus Floropoulos  :  "some1 needs rehab/detox"
Brent Borcherding  :  "Fed Chairman Ben Bernanke "has to keep the economy high as a kite. He has to make sure we don't sober up and realize how screwed up we are," said Peter Schiff, founder and CEO at Euro Pacific Capital in New York. "We don't have a real recovery. It's an illusion, it's a drug-induced high. The minute you take away the drugs we come down. We can't stop easing, ever." "
Kent  :  "REPRICE: 11:48 AM - Wells Fargo Worse"
Michael Owens  :  "my drinking problem is going to make a comeback if we don't see something positive."

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Mortgage Rates:
  • 30 Yr FRM 4.43%
  • |
  • 15 Yr FRM 3.50%
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  • Jumbo 30 Year Fixed 4.20%
MBS Prices:
  • 30YR FNMA 4.5 106-30 (0-06)
  • |
  • 30YR FNMA 5.0 109-07 (0-04)
  • |
  • 30YR FNMA 5.5 110-13 (0-02)
Recent Housing Data:
  • Mortgage Apps -3.31%
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  • Refinance Index -3.75%
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  • FHFA Home Price Index 0.67%