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Positive Reprices as Stocks/Bonds Test Technical resistance
Posted to: Micro News
Monday, January 13, 2014 1:34 PM

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MBS and Treasuries both moved to test technical boundaries this morning and are now breaking out this afternoon (aka "testing" for confirmation).   That said, confirmation would be slightly less conclusive today as volume will struggle to make it to HALF of Friday's.

For MBS, the technical barrier at 104-00 has since given way to 104-02.  10yr yields have a pivot point between 2.836 and 2.82.  They're currently right in line with the latter.

One contributing factor has emerged in the form of asset allocation trading, which is just a fancy way to say money is flowing out of stocks and into bonds (or vice versa depending on the day).  Considering that S&P shed more than 10 points in the hour from 12:22 to 1:22pm, the portfolio rebalancing is definitely favoring bonds.  Think of this as an incremental boost as opposed to the most direct driver.

The net effect is a 9/32nds gain in Fannie 4.0s, with almost all of it arriving AFTER the first round of rate sheets.  This has made for quite a few positive reprices so far today.  The possibility remains on the table.




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Mortgage Rates:
  • 30 Yr FRM 3.96%
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  • 15 Yr FRM 3.16%
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  • Jumbo 30 Year Fixed 3.81%
MBS Prices:
  • 30YR FNMA 4.5 108-20 (0-03)
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  • 30YR FNMA 5.0 110-27 (0-01)
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  • 30YR FNMA 5.5 111-27 (0-02)
Recent Housing Data:
  • Mortgage Apps 4.93%
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  • Refinance Index 0.90%
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  • FHFA Home Price Index 0.67%