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You are viewing Micro News from Thursday, Mar 27, 2014 - View all recent Micro News
  • 3/27/14
    MBS at Best Levels; Positive Reprice Potential

    Based on price gains, positive reprices have been possible for several hours (since our last update), but are increasingly possible with the strength seen after the strong 7yr Treasury Auction.

    Fannie 4.0s aren't any higher than they were at the time of the last update, but they just put in half an hour at 104-09 (compared to current prices at 104-07).  Additionally, Fannie 3.5s are a few ticks higher, up 7/32nds from morning rate sheet times at 100-29. 

    Looks like the first few reprices are starting to hit as I type.  Rally on.

    Category: MBS, UPDATE
    Share:   
  • 3/27/14
    7yr Auction Preview

    MBS and Treasuries are at their best levels of the day heading into the 7yr Treasury Auction.

    There are two key components in assessing the strength of the auction: demand (measured by the bid-to-cover ratio or BTC) and the awarded yield (denoted by the "High Yield").

    We can get a baseline for an average BTC by looking at recent auctions.  They've done better so far in 2014 with a 2.65 and 2.72 in Jan and Feb (2.36 and 2.45 before that).  Anything over 2.6 would be healthy.

    The baseline for the high yield is the "when-issued" 7yr yield, which is the future delivery of today's auction when it is ultimately issued.  It trades at a different yield than cash 7's (the stuff on your screen), and is currently at 2.266 but may change a bit before the 1pm cut-off.

    Category: MBS, UPDATE
    Share:   
  • 3/27/14
    Edging Into Positive Reprice Territory for Some Lenders

    Bond markets have performed surprisingly well after morning data that certainly would have been within its rights to have a negative impact (mostly thinking about Jobless Claims here).  Apart from that, everything else was at least slightly weaker than expected. 

    Some of the strength could be due to the ongoing seesaw between shorter and longer maturity Treasuries since last week's FOMC events.  Today has seen the longer end benefit at the expense of the shorter end.  Fortunately, MBS identify more with the longer end.

    Fannie 4.0s are up 2 ticks on the day now, which is 4 ticks (.125) above 9:30am levels.  That's just enough for the early lenders to begin considering positive reprices.  Even at certain times after 10am, prices dipped back to 104-02, meaning they too are looking at 4+ ticks of improvement.

    Category: MBS, UPDATE
    Share:   
  • 3/27/14
    Bond Markets Holding Ground After Claims and GDP

    GDP and Jobless Claims are out just now.  The former didn't really do anything interesting, coming in at 2.6 vs a 2.7 forecast and 2.4 previously.  While the evening news will be sure to mention the modest acceleration in economic growth, the real story this morning is Jobless Claims, though markets aren't doing much with it.

    In late 2013, claims approached the low 320's and bounced noticeably.  They then underwent a period of heavy distortion into and out of the government shut-down and computer upgrade issues in California.  It took several more weeks for the numbers to level off again, and for market participants to put much stock in them.

    Even now, it's not the most important data on the shelf, but it has been getting back to its former level of meaningfulness.  It's still just a bit too soon to plan on the continuation of this trend, but today's 311k print is the 4th time in a row that claims have been under that modal low range in the 320s.

    2014-3-27 jobless claims 1

    So far, the reaction has been good, considering the data.  There was a brief, obligatory spat of selling pressure, but it didn't last long or go very far.  10yr yields are just barely in positive territory and MBS are within 2 ticks (keep in mind that Treasuries' day-over-day change is based on 3pm on the previous day while MBS is based on 5pm). 

    No clear trend has emerged since the data.  Next up is Pending Home Sales at 10am and then the 7yr Note auction at 1pm.

    Category: MBS, UPDATE
    Share:   
 
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  • 3/27/14

    Based on price gains, positive reprices have been possible for several hours (since our last update), but are increasingly possible with the strength seen after the strong 7yr Treasury Auction.

    Fannie 4.0s aren't any higher than they were at the time of the last update, but they just put in half an hour at 104-09 (compared to current prices at 104-07).  Additionally, Fannie 3.5s are a few ticks higher, up 7/32nds from morning rate sheet times at 100-29. 

    Looks like the first few reprices are starting to hit as I type.  Rally on.

    Category: MBS, UPDATE
    Share:   
  • 3/27/14

    MBS and Treasuries are at their best levels of the day heading into the 7yr Treasury Auction.

    There are two key components in assessing the strength of the auction: demand (measured by the bid-to-cover ratio or BTC) and the awarded yield (denoted by the "High Yield").

    We can get a baseline for an average BTC by looking at recent auctions.  They've done better so far in 2014 with a 2.65 and 2.72 in Jan and Feb (2.36 and 2.45 before that).  Anything over 2.6 would be healthy.

    The baseline for the high yield is the "when-issued" 7yr yield, which is the future delivery of today's auction when it is ultimately issued.  It trades at a different yield than cash 7's (the stuff on your screen), and is currently at 2.266 but may change a bit before the 1pm cut-off.

    Category: MBS, UPDATE
    Share:   
  • 3/27/14

    Bond markets have performed surprisingly well after morning data that certainly would have been within its rights to have a negative impact (mostly thinking about Jobless Claims here).  Apart from that, everything else was at least slightly weaker than expected. 

    Some of the strength could be due to the ongoing seesaw between shorter and longer maturity Treasuries since last week's FOMC events.  Today has seen the longer end benefit at the expense of the shorter end.  Fortunately, MBS identify more with the longer end.

    Fannie 4.0s are up 2 ticks on the day now, which is 4 ticks (.125) above 9:30am levels.  That's just enough for the early lenders to begin considering positive reprices.  Even at certain times after 10am, prices dipped back to 104-02, meaning they too are looking at 4+ ticks of improvement.

    Category: MBS, UPDATE
    Share:   
  • 3/27/14

    GDP and Jobless Claims are out just now.  The former didn't really do anything interesting, coming in at 2.6 vs a 2.7 forecast and 2.4 previously.  While the evening news will be sure to mention the modest acceleration in economic growth, the real story this morning is Jobless Claims, though markets aren't doing much with it.

    In late 2013, claims approached the low 320's and bounced noticeably.  They then underwent a period of heavy distortion into and out of the government shut-down and computer upgrade issues in California.  It took several more weeks for the numbers to level off again, and for market participants to put much stock in them.

    Even now, it's not the most important data on the shelf, but it has been getting back to its former level of meaningfulness.  It's still just a bit too soon to plan on the continuation of this trend, but today's 311k print is the 4th time in a row that claims have been under that modal low range in the 320s.

    2014-3-27 jobless claims 1

    So far, the reaction has been good, considering the data.  There was a brief, obligatory spat of selling pressure, but it didn't last long or go very far.  10yr yields are just barely in positive territory and MBS are within 2 ticks (keep in mind that Treasuries' day-over-day change is based on 3pm on the previous day while MBS is based on 5pm). 

    No clear trend has emerged since the data.  Next up is Pending Home Sales at 10am and then the 7yr Note auction at 1pm.

    Category: MBS, UPDATE
    Share:   
 
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