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Liquidity Getting Thin (What Does That Mean?); Prices Sliding Again
Posted to: Micro News
Wednesday, June 4, 2014 1:57 PM

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At a glance, prices are sliding back toward the lows of the day, which could reintroduce some small amount of reprice risk.  Logically, if lenders didn't reprice at the lows earlier today, they're not too likely to reprice until/unless we break those lows this afternoon, and we haven't yet.

The most noticeable feature in this afternoon's trading environment is a lack of liquidity (also known as "thin liquidity" or "illiquidity" among other things).  What's that?

Liquidity quite simply is "volume at price."  In other words, how much trading is going on at any given price.  If there are lots and lots of buyers and sellers interested in transacting business at several different prices, that's a highly liquid market--a vibrant and healthy marketplace.

This afternoon is more like a dusty, unpaved street in the old west before a gunfight.  There aren't many folks around, and those who are, probably aren't going to get too close to each other.  Most traders have taken their positions ahead of tomorrow's big news.  That would be like the general population of the old west town running inside the buildings and peering out over the saloon doors and through windows.

When the fate of the town is being decided by only a handful of people, every shot counts as far as turning the tide of the fight.  When fewer traders are transacting business, every trade counts for more.  It has more market moving potency than it otherwise would.  Based on who is currently left in this fight, sellers are in control. 

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Mortgage Rates:
  • 30 Yr FRM 3.67%
  • |
  • 15 Yr FRM 2.95%
  • |
  • Jumbo 30 Year Fixed 3.62%
MBS Prices:
  • 30YR FNMA 4.5 108-28 (0-00)
  • |
  • 30YR FNMA 5.0 110-17 (-0-04)
  • |
  • 30YR FNMA 5.5 111-30 (0-02)
Recent Housing Data:
  • Mortgage Apps 10.03%
  • |
  • Refinance Index 11.33%
  • |
  • Purchase Index 8.43%