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  • Bond Markets Slip After Tepid 5yr Auction; Bouncing Back Already    MND Micro News  - 15 hrs, 50 mins ago

    Though it's not the exclusive driver of momentum this afternoon, a lackluster 5yr Note auction did give way to a moderate amount of weakness though bond markets were already coming off their highs heading into the noon hour.

    The auction itself wasn't terrible when viewed against longer-term historical averages, but compared to the only 2 examples of the 5yr auction falling within the time-frame of the current range (February and March), it left much to be desired.

    As is typically the case for MBS and 10yr yields when it comes to the 5yr auction, there wasn't a big reaction.  It simply cast another vote for a mild correction that was already underway.  On a positive note, it gave MBS a chance to stay sideways long enough for lenders to offer positive reprices.

    Additionally, in the past few minutes, the weakness looks like the exception rather than the rule.  10yr yields bounced nicely just before hitting 2.70.  MBS similarly held firm at this morning's pivot point 104-08, currently up 6 ticks on the day (same as last update) at 104-09.

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  • Bond Markets Slightly Stronger as Conditions Normalize    MND Micro News  - 18 hrs, 33 mins ago

    The first two days of the week were 'abnormal.'  It's not that they were particularly strange in any alarming way, just that a few of the more common ingredients in the average bond market recipe were missing.  Certainly, volume and participation were the most notable absences, not to mention outright movement (because there wasn't much movement).  We also saw a noticeable breakdown in the recently strong correlation between stock prices and bond yields.

    All that changed overnight and into this morning.  The overnight session saw sensible connections between global economic data and bond market movement.  Weaker data in the Asian session made for a slight boost and stronger data in the European session, a slight detraction.  The net effect was positive for Treasuries overnight, with 10yr yields hitting the domestic session about 2bps lower.

    MBS walked in the door about 2/32nds higher in price and gained another tick since then.  The stock lever has been well connected based on futures trading, so the next major potential for movement is coming up just before and after the 6:30am cash open for stocks.  After that, the first and only significant economic data of the day is out at 10am with New Home Sales.

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  • Bond Markets Improve After Ugly New Home Sales Data    MND Micro News  - 18 hrs, 33 mins ago

    New Home Sales bombed.  Here's the run-down and a chart

    • New Home Sales for March 384k vs 450k forecast, 449k previously
    • 14.5 pct decline, biggest drop since July 2013 (when rate spike hit the numbers)
    • Midwest fared worst -21.5, Northeast improved 12.5 pct
    • Supply jolts higher to 6.0 months worth, 5.0 months previously
    • Median prices hit record high of $290k

    Bond markets moved to their best levels of the day immediately following the data, but not aggressively so.  Stocks also fell, but are already bouncing back.  Bond markets aren't following the bounce though, instead holding near their best levels.

    2014-4-23 NHS

    10 yr yields are down 3.3bps on the day at 2.693 and Fannie 4.0s are up 6 ticks at 104-10. 

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  • Very Slight Positive Reprice Potential For Some Lenders    MND Micro News  - Tue, Apr 22 2014, 3:14 PM

    Bond markets are at their best levels of the day, though there's not really an interesting story as to how they got there.  Reason being: they haven't moved much at all today, with the exception of noticeable ebbs and flows just after 9am and then coming the other way heading into Noon.  Rather than create any new movement, these flows ended in a wash, suggesting possible corporate rate lock hedging (companies selling Treasuries in order to lock in their funding costs between the time their corporate debt offering is priced and when it is fully subscribed--at which point the Treasuries are bought back).

    From the morning lows, Fannie 4.0s and 3.5s are up 4-5 ticks, which is technically enough for any lender pricing during those lows (or close to them) to consider a positive reprice. 

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  • Negative Bias Emerging as Participation Picks Up    MND Micro News  - Tue, Apr 22 2014, 9:36 AM

    As bond market activity gets back to more acceptable levels, the participation that's come into the market has been mostly negative for Treasuries, and slightly less negative for MBS.  Earlier, this merely resulted in slight improvements overnight moving back to unchanged levels, but in the past few minutes it's taken 10yr yields about 2bps into weaker territory, currently 2.7388.

    MBS are only 1-2 ticks weaker from the last update.  Fannie 4.0s are down 2 on the day at 103-31+ and Fannie 3.5s are down 3 ticks at 100-21.  That update also noted a disconnected stock lever, but the timing of the current weakness in bonds combined with stocks presently opening stronger suggests that could be changing.

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  • Bond Markets Unchanged and Uninspired    MND Micro News  - Tue, Apr 22 2014, 9:07 AM

    The week continues to suffer from a lack of participation and excitement (not that excitement is always what we'd want to see when it comes to rates).  Although market participants returned from holiday breaks in Asia and Europe, it didn't do a whole lot to reveal any directional biases.

    Case in point, Treasuries were insignificantly stronger, then weaker overnight and have been hovering around unchanged levels since the domestic session began.  MBS opened a few ticks weaker and gained them back in the first hour.  Fannie 4.0s are 1 tick from unchanged and 3.5s are 2 ticks weaker.

    The only significant economic data of the day is Existing Home Sales at 10am.  Normally, it would make some sense to point out that it's earnings season and uninspired bond markets might take cues from stocks, but so far, the stock lever has been fairly disconnected.

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  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Mon, Apr 21 2014, 2:40 PM
  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Mon, Apr 21 2014, 1:24 PM
  • Bond Markets In Moderately Stronger Territory Amid Quiet Conditions    MND Micro News  - Mon, Apr 21 2014, 9:14 AM

    In what can only be described as a logical stroke of genius, at some point in time, Europe and some of Asia decided it would make more sense to set Monday as the Easter-related market holiday as opposed to Good Friday.  As such, the overnight session didn't begin in force until early domestic trading got underway around 6am.

    The small amount of activity seen has at least been positive for bond markets, but for no discernible reason.  A limited amount of trading in Asia carried Treasury yields slightly lower.  Domestic market participants re-set yields back to Thursday's highs and have since moved them down to overnight lows.

    MBS opened stronger and have moved up a few ticks since then, seeing less volatility than Treasuries.  Fannie 4.0s are up 5 ticks at 104-04 and Fannie 3.5s are up 6 ticks at 100-28. 

    Note: Ginnie pricing is showing a 3-5 tick loss, but this is due to the Ginnie-only 'roll' taking place on Thursday, but not being reflected in day-over-day price changes until today.  There is no crazy weakness present in Ginnies.

    There are no significant reports on the calendar this morning and in general, activity is just warming up for slightly better prospects tomorrow.

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  • Reminder: Bond Markets Closed For Good Friday    MND Micro News  - Fri, Apr 18 2014, 9:37 AM

    Bond markets including MBS are closed for the Good Friday holiday.  Banks are open.  As such, some lenders may issue rate sheets, but past precedent suggests they'll be in line with yesterday's or otherwise conservative.  With no MBS trading, no reprice risk is expected.

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  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Thu, Apr 17 2014, 12:10 PM
  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Thu, Apr 17 2014, 11:37 AM
  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Thu, Apr 17 2014, 10:18 AM
  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Thu, Apr 17 2014, 10:07 AM
  • Back Near Unchanged Levels Ahead of Stock Open    MND Micro News  - Thu, Apr 17 2014, 9:23 AM

    Roughly 10 minutes after the Jobless Claims data, bond market losses found support just past yesterday's weakest levels.  Incidentally, 10yr yields bounced very close to the 2.66% technical level that we're watching as a gauge of their ability to hold sideways or better in the short term.

    MBS are back within 2 ticks of unchanged levels and 10yr yields are back down to 2.646.  The bounce followed equities futures 'topping out' for the morning.  They've since been relatively sideways ahead of the cash open at 9:30am.

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  • Bond Markets Weaker into Domestic Session and After Stronger Claims Data    MND Micro News  - Thu, Apr 17 2014, 8:36 AM

    Treasuries were mostly flat overnight until about 7am Eastern time.  From there yields rose slowly, along with stock prices, moving from 2.63 to 2.65 ahead of the morning's first economic data: weekly Jobless Claims.

    The data was stronger than expected:

    • 304k claims vs 314k forecast
    • Previous week revised to 302k from 300k
    • Continued Claims 2.739 mln vs 2.795 mln forecast

    Bond markets weakened another few ticks after this data with 10yr yields briefly touching 2.66 just now (2.659 currently) and Fannie 4.0s down 5 ticks at 104-09. 

    The only other significant data this morning arrives at 10am with the Philly Fed Index.  Then bond markets close early at 2pm ahead of tomorrow's full closer for Good Friday.  Participation should trail off rapidly by noon.

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  • MBS and Treasuries Holding Narrow Ranges at Best Levels    MND Micro News  - Wed, Apr 16 2014, 2:34 PM

    Today continues to be wholly uneventful for bond markets.  After beginning the domestic session just barely inside yesterday's weakest levels, both MBS and Treasuries have simply been drifting sideways and slightly higher in price (lower in yield).

    To reinforce the notion that this is uneventful, MBS still haven't broken into positive territory with Fannie 4.0s down 1 tick on the day at 104-15.  10yr yields are just about 1bp higher than yesterday at 2.6373.

    That said, MBS are an eight of a point higher from the time of day that some lenders released their first rate sheets.  As such, positive reprices are an outside possibility for a few of those lenders, but an eighth of a point is really only the threshold beyond which reprices become possible. 

    It would take a bit more positivity to make them 'probable' outside the one or two lenders that reprice most aggressively.  Additionally, as of right now, we haven't moved past that threshold.  Uneventful...

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  • Stronger Manufacturing Data Gives Bond Markets Pause    MND Micro News  - Wed, Apr 16 2014, 9:24 AM

    Industrial Production and Capacity Utilization data came out stronger than expected just now.  Here's the run-down:

    • March Industrial Output +0.7 vs +0.5 forecast
    • Big revision in February to +1.2 from +0.6 previously
    • Capacity Use Rate 79.2 vs 78.7 forecast, highest since June 2008

    10yr yields moved relatively quickly to their highest levels of the day.  MBS mimicked the move with less conviction, but are still falling on the data.  Fannie 4.0s are currently down 5 ticks at 104-11 and Fannie 3.5s are down 6 ticks at 101-03.

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  • Holding Ground in Weaker Territory After Lackluster Housing Data    MND Micro News  - Wed, Apr 16 2014, 8:48 AM

    Bond markets were weaker overnight, further backing away from the geopolitical risk-driven rally that took place yesterday morning.  Stronger Chinese GDP also helped markets move back towards 'risk' (stocks and bond yields higher). 

    By the open, 10yr yields and MBS were both almost perfectly back in line with yesterday's weakest levels.  So far, they've gone no higher thanks to a weaker-than-expected reading on Housing Starts. 

    • March Housing Starts 946k vs 973k forecast
    • February Housing Starts revised to 920k from 907k
    • Housing Permits 990k vs 1008k forecast
    • singe-family permits and starts rose while multifamily fell

    MBS and Treasuries both improved just slightly following the data and are currently at their best levels of the morning.  Stocks are at their weakest levels of the morning--a fact that further helps bond markets in the current environment (where the stock lever has been so well connected).

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  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Tue, Apr 15 2014, 2:56 PM
  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Tue, Apr 15 2014, 2:11 PM
  • MBS Now Above Yesterday's Highs; Ongoing Positive Reprice Potential    MND Micro News  - Tue, Apr 15 2014, 12:57 PM

    Ukraine, as a market mover, went from a distant memory yesterday to 'front and center' for most of today.  As global financial markets weigh the prospects of civil war--chiefly the involvement of larger nations like the US and Russia--bond markets have rallied strongly and stocks have sold-off.

    Treasuries, which benefit more from such flight-to-safety trading, had already broken below yesterday's low yields.  MBS have now joined them in breaking yesterday's best levels, though they continue to lag overall (which is normal in these cases). 

    Still, the incremental improvements make positive reprices incrementally more likely.  We're in a situation now where if you haven't seen a reprice yet, you almost certainly will.  Fannie 4.0s are up a quarter of a point at 104-20 and Fannie 3.5s are up 10/32nds at 101-16.

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  • Bond Markets Jump into Positive Territory    MND Micro News  - Tue, Apr 15 2014, 10:35 AM

    After wallowing around in negative territory all morning, MBS and Treasuries have precipitously moved into the green.  Stock markets are taking part in the move as well.  The timing doesn't line up with any economic data or market events, and thus is assumed to be linked to headlines out of Ukraine.  To a lesser extent, news of a potential pipe bomb in Boston may have contributed to the flight-to-safety.

    At this point, however, the pipe bomb story looks to be resolved (though it was just making the rounds when the move began).  Ukraine headlines, however, are ongoing, and suggest at least a possibility of imminent violence.

    Fannie 4.0s are now up 3 ticks on the day at 104-16 and 10yr yields are down 1.6bps at 2.625. 

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  • Bond Markets Holding Ground at Slightly Weaker Levels After Data    MND Micro News  - Tue, Apr 15 2014, 8:51 AM

    There hasn't been a decisive move in MBS or Treasuries yet, following the 830am economic data.  If you had to assign a label, it's probably "sideways" for now.  The only downside is that bonds were slightly weaker overnight, confirming yesterday's late weakness in MBS.

    The losses haven't been extreme with Fannie 4.0s down only 2 ticks on the day.  10yr yields are up 1.6b3 ps at 2.655--under the 2.663 highs from earlier this morning.

    The economic data was a mixed bag with inflation being slightly hotter than forecast and the NY Fed Manufacturing numbers being weaker.

    CPI

    • +0.2 vs +0.1 forecast 
    • Core CPI (excludes food and energy) +0.2 vs +0.1 forecast
    • Year over year Core CPI +1.7 vs +1.6 forecast

    Markets looked like they might have been reacting to the traction in inflation data right at 8:30am, but perhaps the lackluster manufacturing data helped balance the outlook.

    Empire State Manufacturing

    • +1.29 in April vs +8.0 forecast, +5.61 in March
    • Employment Index +8.16 vs +5.88 in March
    • 6-Month Outlook +38.23 vs +33.21 in March

    The next data this morning will be the NAHB Housing Market Index at 10am.

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  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Mon, Apr 14 2014, 4:19 PM
  • MBS Bouncing Along Lows; Modest Reprice Risk Remains    MND Micro News  - Mon, Apr 14 2014, 2:19 PM

    Nothing about trading levels has changed since 11am as MBS continue to bounce along at the lowest prices of the day.  On a positive note, they've done a good job of not breaking any lower.  On a negative note, the losses are right around an eighth of a point for some lenders depending on the time of day they generated rate sheets.

    While that suggests most are not at great risk of negative reprices, it also means it can't be ruled out for others (a few already have).  On a qualitative note, losses today would break the recent streak of steady-to-lower rates for the past 6 sessions.

    Reprice risk would increase if Fannie 4.0s move below 104-14 or if Fannie 3.5s move below 101-06.  Technical support at 2.656 in 10yr yields also seems worth glancing at as that's where yields held firm twice this morning (currently 2.643).

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  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Mon, Apr 14 2014, 10:54 AM
  • MBS Rally Back to Unchanged As Stocks Fall    MND Micro News  - Mon, Apr 14 2014, 9:58 AM

    Stocks and bonds haven't been perfectly connected all morning, but are generally moving in the same direction at the same time.  As such, bond markets did a good job of battling back against earlier weakness when stock futures shied away from a stronger rally on the Retail Sales data.

    When stocks hit the 'cash' open at 9:30am, they fell below their 8:30am levels implied by futures.  Bond markets mirrored the move, with MBS rising back above 8:30am levels.

    Both MBS and Treasuries are now at their best levels of the morning.  Fannie 4.0s are unchanged from Friday's latest levels at 104-19 and 10yr yields are still slightly weaker at 2.63.

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  • Bond Markets Weaker after Retail Sales Data    MND Micro News  - Mon, Apr 14 2014, 8:39 AM

    Bond markets are off to a weaker start this morning thanks to a combination of modest losses overnight (stocks and bond yields bounced higher together) and additional selling pressure after a stronger-than-expected Retail Sales report.  Fannie 4.0s are down 4 ticks at 104-15 and Fannie 3.5s are down 6 ticks at 101-06.  10yr yields are up 3.1bps at 2.6. 

    Retail Sales

    • +1.1 vs +0.8 forecast, biggest rise since Sep 2012
    • Excluding Autos/Gasoline +1.0 vs +0.4 last month

    The only other economic data this morning is Business Inventories at 10am, which isn't typically a market-mover.  Of greatest concern at the moment is the fact that this post-data weakness is a vote in favor of the potential technical resistance discussed in this morning's commentary.

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  • Reprice Risk on Hold Along with Stock Rally    MND Micro News  - Fri, Apr 11 2014, 12:24 PM

    After spending the morning trading mostly sideways Treasury yields and stocks broke higher into the 11am hour.  This brought MBS just barely into their weakest levels of the day, but right on the edge of negative reprice risk for some lenders who were looking at 4 ticks (.125) of weakness since their first rate sheets.

    We've pulled back from that 'edge' by at least 2 ticks now (2 for Fannie 4.0s and 3/32nds for Fannie 3.5s).  Stocks and bonds continue sticking close to each other.  Bonds are right back in yesterday afternoon's range.  There's little else to report until/unless stocks  start making bigger moves.

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