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MBS Bounce Back As Markets Swing Back Toward "Risk-Off"
Posted to: Micro News
Wednesday, February 6, 2013 1:24 PM

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It's really just like the 'good old days' when stocks and bonds could be counted on to move in the same direction in similar amounts relative to previous moves. Actually, in the current case, we're seeing bond markets express a bit more of the "risk-off" sentiment than stocks, though both are participating. The Euro is participating as well after Italian prosecutors announced the seizure of €40 mln in connection with the unfolding Monte Paschi drama. Around the same time, a Bloomberg story began making rounds, in which Citi's Chief Economist Wllem Buiter said that the EU asset boom "looks fragile."

We'll stop short of assigning the noticeable swing in MBS and Treasuries to either one of these headlines as there are/were tradeflow considerations in play as well. All of the above is compounded by the fact that markets have been pretty "sleepy" until now, and minor developments are having bigger impacts than they otherwise might.

Unlike the morning hours, it's now working in our favor. MBS are up 5 ticks on the day now at 103-13, 10yr yields have bounced back to test 1.97 and S&P's have come off about 5-6 points. The swing for MBS essentially unwinds any previous reprice risk and perhaps even tilts it positively (though we'd want to see current levels held or improved upon slightly before expecting more than one or two token reprices).

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Mortgage Rates:
  • 30 Yr FRM 3.68%
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  • 15 Yr FRM 2.96%
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  • Jumbo 30 Year Fixed 3.62%
MBS Prices:
  • 30YR FNMA 4.5 108-29 (0-01)
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  • 30YR FNMA 5.0 110-22 (0-01)
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  • 30YR FNMA 5.5 111-31 (0-03)
Recent Housing Data:
  • Mortgage Apps 10.03%
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  • Refinance Index 11.33%
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  • Purchase Index 8.43%