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You are viewing Micro News from Tuesday, Mar 11, 2014 - View all recent Micro News
  • 3/11/14
    MBS Recover Modestly as Treasuries Push Into Best Levels

    While we discuss the snowball selling in Fannie Mae's stock price, snowball buying in Treasuries is helping Fannie MBS limp back to unchanged levels.  In fact Fannie 4.0s JUST now hit +0-00 for the first time since this morning's Senate headlines.  That puts them up 5 ticks from the sideways grind through mid-day. 

    Treasuries continue to fare even better with 10's now down to 2.764, themselves perhaps drawing some strength from languishing equities markets and corporate debt-related tradeflows (corporate accounts hedge by selling Treasuries and then buy back after their issuance). 

    Based purely on the difference in MBS Prices from mid-day to now, positive reprices are possible, but we'd note that we're in the midst of Class A (Fannie and Freddie 30yr Fixed) Settlement for MBS and that lenders tend to be less quick to reprice for the better or worse until after the settlement cycle (so Thursday).

    Category: MBS, UPDATE
    Share:   
  • 3/11/14
    Treasuries OK, MBS Less so, but Sideways for now

    After falling into negative territory after 10am, bond markets found support by 10:30.  Since then, MBS have mostly flattened out and held on to most of the weakness while Treasuries came charging back into positive territory ("charging" is a relative term in this context considering all of the above continues to transpire well inside Friday's range).

    The most plausible explanations for the noticeable MBS underperformance are the Senate GSE reform headlines along with the fact that it's Settlement time for Fannie/Freddie 30yr MBS (tonight is the roll).

    Settlement always has the potential to expose imbalances between supply and demand as well as across settlement months.  This is clearly contributing to today's weaker MBS performance as April deliveries are holding up better than March, but doesn't account for all of it.

    The rest of the weakness doesn't have much else to explain it apart from the Senate headlines.  While there's not a high probability of any near-term legislative changes, the introduction of this "new thing" means we have at least some small degree of uncertainty that didn't exist earlier this morning.  Given the timing of the MBS Underperformance, it's hard to consider that it could come from anything else.

    2014-3-11 tsy vs mbs

    Category: MBS, UPDATE
    Share:   
  • 3/11/14
    To be clear, there is no new legislation being voted...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 3/11/14
    Bond Markets Sharply Sideways Overnight, Little-Changed This AM

    To say that Treasuries and MBS have been mostly sideways since Friday's NFP would be a vast and hilarious understatement.  While markets may not be officially closed, these first two days of the week have been something of a gentleman's time-out.  If this were a game of Cricket, the umpire has not stopped play, yet the cricketers have carried chesterfields and tea tables on to the pitch and sat down for a nice cup of Darjeeling until they can all agree that it's time to start playing again. 

    Certainly, Cricket is the furthest thing from their minds during that imaginary conversation just as legitimate, profit-oriented trading is far from the minds of bond traders so far this week.  Just biding time until something changes. 

    Note yesterday's "funnel of consolidation" leading to today's "spout of ultimately sideways narrowness."  Those are highly specialized technical terms, but you get the idea.  Bonds are sideways.  Nothing to trade. 

    2014-3-11 tsy sideways

    In this environment, the motivation to end the tea party can come at any time from any event that speaks loudly enough.  It could be larger tradeflows born of the necessity of corporate debt hedging or simply a disconcerting headline regarding Ukraine (though a word of caution there: the press will continue to magnify any Ukraine-related headline, whether meaningful or not.  Only trading levels can tell us what markets deem important.  So far, for all the "military drills" and other seemingly interesting headlines, nothing has really registered in more than a week).

    There is no significant economic data on the calendar apart from Wholesale Inventories at 10am, which is arguably not that significant.  1pm brings the 3yr Note auction which might almost be a detectable market mover, but usually isn't.

    Category: MBS, UPDATE
    Share:   
 
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  • 3/11/14

    While we discuss the snowball selling in Fannie Mae's stock price, snowball buying in Treasuries is helping Fannie MBS limp back to unchanged levels.  In fact Fannie 4.0s JUST now hit +0-00 for the first time since this morning's Senate headlines.  That puts them up 5 ticks from the sideways grind through mid-day. 

    Treasuries continue to fare even better with 10's now down to 2.764, themselves perhaps drawing some strength from languishing equities markets and corporate debt-related tradeflows (corporate accounts hedge by selling Treasuries and then buy back after their issuance). 

    Based purely on the difference in MBS Prices from mid-day to now, positive reprices are possible, but we'd note that we're in the midst of Class A (Fannie and Freddie 30yr Fixed) Settlement for MBS and that lenders tend to be less quick to reprice for the better or worse until after the settlement cycle (so Thursday).

    Category: MBS, UPDATE
    Share:   
  • 3/11/14

    After falling into negative territory after 10am, bond markets found support by 10:30.  Since then, MBS have mostly flattened out and held on to most of the weakness while Treasuries came charging back into positive territory ("charging" is a relative term in this context considering all of the above continues to transpire well inside Friday's range).

    The most plausible explanations for the noticeable MBS underperformance are the Senate GSE reform headlines along with the fact that it's Settlement time for Fannie/Freddie 30yr MBS (tonight is the roll).

    Settlement always has the potential to expose imbalances between supply and demand as well as across settlement months.  This is clearly contributing to today's weaker MBS performance as April deliveries are holding up better than March, but doesn't account for all of it.

    The rest of the weakness doesn't have much else to explain it apart from the Senate headlines.  While there's not a high probability of any near-term legislative changes, the introduction of this "new thing" means we have at least some small degree of uncertainty that didn't exist earlier this morning.  Given the timing of the MBS Underperformance, it's hard to consider that it could come from anything else.

    2014-3-11 tsy vs mbs

    Category: MBS, UPDATE
    Share:   
  • 3/11/14
    To be clear, there is no new legislation being voted...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 3/11/14

    To say that Treasuries and MBS have been mostly sideways since Friday's NFP would be a vast and hilarious understatement.  While markets may not be officially closed, these first two days of the week have been something of a gentleman's time-out.  If this were a game of Cricket, the umpire has not stopped play, yet the cricketers have carried chesterfields and tea tables on to the pitch and sat down for a nice cup of Darjeeling until they can all agree that it's time to start playing again. 

    Certainly, Cricket is the furthest thing from their minds during that imaginary conversation just as legitimate, profit-oriented trading is far from the minds of bond traders so far this week.  Just biding time until something changes. 

    Note yesterday's "funnel of consolidation" leading to today's "spout of ultimately sideways narrowness."  Those are highly specialized technical terms, but you get the idea.  Bonds are sideways.  Nothing to trade. 

    2014-3-11 tsy sideways

    In this environment, the motivation to end the tea party can come at any time from any event that speaks loudly enough.  It could be larger tradeflows born of the necessity of corporate debt hedging or simply a disconcerting headline regarding Ukraine (though a word of caution there: the press will continue to magnify any Ukraine-related headline, whether meaningful or not.  Only trading levels can tell us what markets deem important.  So far, for all the "military drills" and other seemingly interesting headlines, nothing has really registered in more than a week).

    There is no significant economic data on the calendar apart from Wholesale Inventories at 10am, which is arguably not that significant.  1pm brings the 3yr Note auction which might almost be a detectable market mover, but usually isn't.

    Category: MBS, UPDATE
    Share:   
 
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