MBSonMND: MBS RECAP
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FNMA 3.5
93-19 : +0-09
FNMA 4.0
97-27 : +0-06
FNMA 4.5
101-11 : +0-06
FNMA 5.0
104-08 : +0-05
GNMA 3.5
94-25 : +0-08
GNMA 4.0
99-21 : +0-08
GNMA 4.5
102-30 : +0-07
GNMA 5.0
105-27 : +0-07
FHLMC 3.5
93-13 : +0-09
FHLMC 4.0
97-22 : +0-06
FHLMC 4.5
101-07 : +0-07
FHLMC 5.0
104-03 : +0-07
Pricing as of 4:01 PM EST
NOTE: We had roll related technical issues with the day over day MBS price change column on our Dashboard today that made it seem like MBS were greatly lagging benchmark Treasuries. Fear not, our price levels are COMPLETELY accurate and 100% LIVE. This problem should be fixed by tomorrow morning.
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
3:34PM  :  US Treasury Official on US and Global Economies
*** SENIOR U.S. TREASURY OFFICIAL SAYS GLOBAL GROWTH REMAINS ON TRACK, U.S. RECOVERY HAS GATHERED STRENGTH *** OFFICIAL SAYS KEY CHALLENGE FOR G20 IS TO PERMIT EXCHANGE RATES TO PERFORM FUNCTIONS IN CORRECTING ECONOMIC IMBALANCES *** OFFICIAL SAYS TIGHTLY CONTROLLED CURRENCIES OF SOME EMERGING COUNTRIES CREATE INSTABILITY, PRESSURE THOSE WITH FLEXIBLE FOREX *** OFFICIAL SEES BROAD CONSENSUS AMONG MAJOR ECONOMIES--NOT JUST G7--ON NEED TO LET CURRENCIES TO ADJUST TO MARKET FORCES *** OFFICIAL-INCONCEIVABLE THAT CONGRESS WOULD "PLAY BRINKSMANSHIP" WITH U.S. CREDIT, CONFIDENT CONGRESS WILL RAISE DEBT LIMIT *** OFFICIAL-EXPECTS G7 TO HOLD LONGSTANDING POSITION THAT EXCESSIVE VOLATILITY IN CURRENCY MARKETS IS UNACCEPTABLE *** U.S. TREASURY OFFICIAL SAYS EXPECTS G20 TO MAKE PROGRESS ON DEVELOPING GUIDELINES TO IDENTIFY CAUSES OF GLOBAL IMBALANCES *** U.S. TREASURY OFFICIAL SAYS EXPECTS A LIST OF COUNTRIES WITH IMBALANCES TO EMERGE SHORTLY, WILL GET MORE ANALYSIS *** U.S. TREASURY OFFICIAL SAYS WANT INDICATIVE GUIDELINES TO HIGHLIGHT IMBALANCES THAT HAVE GLOBAL SYSTEMIC IMPACT
3:15PM  :  MBS and TSY's Hold Ground as Stock Rally Stalls
Stocks turned back from their rally at around 2:30pm and while there's enough time between now and their close for them to head higher again, for now, the net effect has been positive for bonds. The turn around came at a great time for 10yr notes as they were mere moments away from ticking past 3.505 which had been their upper limits supportive yield from earlier in the day. That bounce combined with a few others to form a pretty solid technical picture in which 10's seem to have established some reasonably firm intraday support. (remember, firm support is never a prediction that it will continue to hold, but rather a line of demarcation between trends. If it breaks, it suggests a shift in trend to something less bullish than that which has kept bonds so healthy today). FNCL 4.5's found their own supportive ledge just over 101-10+. The stability afforded a few more lenders opportunities to reprice for the better.
2:32PM  :  New MBS Commentary Post
2:18PM  :  Stocks Rally, Leading to Some Selling in TSY's, MBS
It's important to note that current MBS price levels do not yet justify a reprice for the worse or remove the possibility of reprices for the better. However, given the relatively high correlation between stocks and TSY's, a similar correlation between TSY's and MBS, and the fact that stocks are rallying significantly, this is an early warning that the rest of day cannot safely be assumed to be in constant rally mode. On a positive note, 10yr notes are holding support still, right at 3.50, having just bounced down to 3.494. FNCL 4.5's are much closer to their HIGHS, currently at 101-12, STILL WITHIN the "safe zone" for reprices for the better. S&P's are up to 1316+ and we doubt TSY's would endure a run up to 1319 without breaking 3.50 support, potentially taking MBS out of positive reprice territory. Any further stock rally and bond selling from there could even introduce negative reprice risk by the end of the day.
2:04PM  :  Dallas, KC Feds sought discount rate hike-minutes
CHICAGO, April 12 (Reuters) - Directors of Federal Reserve banks in Kansas City and Dallas unsuccessfully sought another 0.25-percent increase in the rate charged to banks for emergency loans, minutes of Fed meetings in February and March showed on Tuesday. The other 10 regional Fed banks wanted no change in the discount rate. The U.S. central bank's board sided with them, keeping the discount rate unchanged at 0.75 percent in its February 28 and March 14 policy decisions. The Kansas City and Dallas Fed banks have for more months sought to raise the discount rate to 1 percent as a step toward restoring the spread between it and the federal funds rate closer to pre-crisis levels. The federal funds rate, the central bank's main policy tool, has been locked in the zero to 0.25 percent range for more than two years. An increase in the discount rate to 1 percent would boost the surcharge for emergency loans to 0.75 percentage points, still less than the 1 percentage-point surcharge before the crisis. (Reporting by Ann Saphir; Editing by Padraic Cassidy)
2:04PM  :  US govt posts $188 bln budget deficit in Mar
WASHINGTON, April 12 (Reuters) - The United States posted a monthly budget deficit of $188 billion in March as the government spent more than twice what it took in last month, the Treasury Department reported on Tuesday. The Treasury said the cumulative deficit through the first half of fiscal 2011, which began Oct. 1, was a record $829 billion, about 16 percent higher than the prior year's $717 billion first half shortfall. The monthly budget deficit was the second largest shortfall recorded in any March, outsized only by the $192 billion gap posted in March 2009. The monthly shortfall was just shy of the $189 billion forecast of economists polled by Reuters. (Reporting by Corbett B. Daly; Editing by Neil Stempleman)
1:41PM  :  Dealers Chase Inventory in 3-Year Note Auction
Treasury just auctioned $32 billion 3-year notes. Demand as measured by the bid to cover ratio was an above-average 3.25 bids submitted for every 1 accepted by Treasury (vs. 3.07 five auction average). Demand as measured by price/yield was also strong with a high yield of 1.28% which was almost a full basis point below the 1pm "When Issued" yield. Both metrics are indicative of aggressive bidding. From who though? Mainly primary dealers! The street took down an above-average 57.4% of the competitive bid and 25.8% of what they bid on (hit rate). This sizable auction award can be good or bad depending on the demand level of buyers. Direct bidders were awarded 8.9% of the competitive bid vs. the five auction average of 13.2% and indirect bidders added 33.7% of the offering. Both metrics are below average but both accounts tendered large offers, meaning they were interested in buying but only at cheaper dollar prices. It seems like dealers needed to add inventory (high hit rate) while the pre-auction rally seems to have left direct and indirect bidders indifferent. Either way this was a strong auction.
1:18PM  :  ALERT: MBS and TSY's Rally Following Auction. Reprices Possible!
After more than 10 minutes of indecisive trading MBS and TSY's both made their first significant move since the 3yr Note Auction was released with healthy results. 10's broke the 3.49 level that had previously contained rallying yields and now sit at 3.483. FNCL 4.5 MBS broke 101-11 and now sit at 101-13. If these levels are maintained or improved upon, expect reprices for the better from lenders who haven't yet released them, perhaps even a 2nd round from some lenders (even more dependent on holding or improving upon current gains)
12:23PM  :  Trading Range Narrows Ahead of 3yr Treasury Auction
Narrowing range... Converging trends... Triangle... Whatever you want to call it, the lows are getting higher and the highs are getting lower for both MBS and TSY's. FNCL 4.5's are narrowing in on something around a 101-11 price and 10yr notes at 3.50. It's not out of the question to see a bit of a bias toward weakness ahead of the auction, but we'll let you know if it's enough to justify concern about reprices for the worse. Otherwise, the auction itself should be the next significant market mover.
11:41AM  :  ALERT: Roll Related Day Over Day MBS Price Change Error
We are having roll related technical issues with the day over day MBS price change column on our Dashboard that make it seem like MBS are greatly lagging benchmark Treasuries. Fear not, our price levels are COMPLETELY accurate and 100% LIVE. This problem should be fixed by tomorrow morning.
11:17AM  :  New MBS Commentary Post

NOTE: We had roll related technical issues with the day over day MBS price change column on our Dashboard today that made it seem like MBS were greatly lagging benchmark Treasuries. Fear not, our price levels are COMPLETELY accurate and 100% LIVE. This problem should be fixed by tomorrow morning.

Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Daniel Kramer  :  "wells & citi repriced too"
Scott Valins  :  "there goes the stock fade but treasuries not following suit"
Victor Burek  :  "nexbank better"
Bernie  :  "gmac reprice"
Bernie  :  "FAMC reprice"
Matthew Graham  :  "more like that if you were inclined to float already, this would be a reason to let you know there's a chance you're not completely crazy"
Matthew Graham  :  "I don't know that I'm comfortable endorsing "float short term""
Adam Quinones  :  "directionally this is supportive but it doesnt mean we're trending ...right now we'd prefer to treat it as a range trade. We will re-evaluate as time and headlines pass and the curve adjusts."
Adam Quinones  :  "MBS keeping pace with benchmarks...lagging a but not getting destroyed after hitting one month tights yesterday."
Jason Wilborn  :  "I think AQ was referring to Treasuries"
Jason Wilborn  :  "hmmm not sure about that Scott"
Scott Valins  :  "interpretation - float short term, lock long term"
Adam Quinones  :  "def seeing real$ buying in long end after fast$ covered shorts this AM."
Matthew Graham  :  "lots of stock lever in play, but I think markets are entertaining the same thing we are, which is that a good week of auctions and data could push yields back to the 3.4 end of the range"
Bert Swyers  :  "MG is this just 100% stock lever or are we gonna move back down and test low yields again? if I remember we rallied pretty hard after the roll last month"
Matthew Graham  :  "so holding ground sideways would be admirable and a confirmation of a strong auction"
Matthew Graham  :  "with the caveat that markets were expecting a good auction and that we rallied hard into it"
Matthew Graham  :  "B+/A-"
Matthew Graham  :  "US TREASURY - PRIMARY DEALERS TAKE $18.33 BLN OF 3-YEAR NOTES SALE, INDIRECT $10.77 BLN "
Matthew Graham  :  "- U.S. 3-YEAR NOTES BID-TO-COVER RATIO 3.25, NON-COMP BIDS $45.86 MLN "
Matthew Graham  :  " U.S. SELLS $32 BLN 3-YEAR NOTES AT HIGH YIELD 1.280 PCT, AWARDS 76.10 PCT OF BIDS AT HIGH "
Matthew Graham  :  "what concerns me is how non-existent the concession has been"
Matthew Graham  :  "historically, it looks like a relatively decent opportunity to anyone who is unsure about the near term economic undulations (in my opinion)"
Matthew Graham  :  "but then July through Dec were all significantly lower yields"
Matthew Graham  :  "gotta go back to 1/11 to find a time where market was asked to take down lower yields, "
Matthew Graham  :  "last high yield was 1.298, and 1.349 before that"
Matthew Graham  :  "last 5 btc's : 3.22---3.01---3.06---2.91---3.26"
Victor Burek  :  "mg...can you post stats for what we want on auction?"
Andrew Horowitz  :  "if you look at the triangle from that time period it actually looks like we broke the upside trendline today"
Matthew Graham  :  "speaking of triangles, looks like it's time to ride one into auction time"
Matthew Graham  :  "several good parallel trendlines on the upside"
Matthew Graham  :  "even longer term uptrend hard to ignore today, from the absolute last low in Dec 09 connects in April 10 lows, Dec 10 lows, and then of course, TODAY"
Matthew Graham  :  "bigger picture AH, I'm interested in triangle from Early jan highs and early feb lows"
Andrew Horowitz  :  "you could also go back to the mid feb low of 96- change and draw a pretty good line from there to yesterdays low"
Matthew Graham  :  "98-00- ish"
Andrew Horowitz  :  "key is whether we can break the channel to the upside"
Matthew Graham  :  "and suggests itself for overhead resistance on any additional rally"
Matthew Graham  :  "but the best traveled trendline of all of them is in that same slope. basically right through the center of that channel"
Matthew Graham  :  "then your only downside blips are roll-related"
Matthew Graham  :  "hooking up with 1/20 low"
Matthew Graham  :  "and would add another line to it"
Andrew Horowitz  :  "a blip on the radar"
Matthew Graham  :  "so, now I see your channel"
Matthew Graham  :  "agree"
Andrew Horowitz  :  "have to factor out Japan"
Matthew Graham  :  "ah I might see... factoring out Japan Drama round 1?"
Matthew Graham  :  "u taking it back to mid Jan?"
Matthew Graham  :  "i think I set my trend channel steeper than yours based on mid march highs?"
Andrew Horowitz  :  "but the down trend has only been in the past few weeks"
Andrew Horowitz  :  "3 months"