MBSonMND: MBS MID-DAY
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FNMA 3.5
96-04 : +0-05
FNMA 4.0
100-05 : +0-07
FNMA 4.5
103-09 : +0-06
FNMA 5.0
105-25 : +0-05
GNMA 3.5
97-27 : +0-13
GNMA 4.0
101-29 : +0-04
GNMA 4.5
104-31 : +0-05
GNMA 5.0
107-10 : +0-04
FHLMC 3.5
96-01 : +0-08
FHLMC 4.0
99-32 : +0-07
FHLMC 4.5
103-04 : +0-06
FHLMC 5.0
105-18 : +0-04
Pricing as of 11:01 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
10:47AM  :  Borrower Paid vs. Lender Paid: Updating GFEs
Fifth Third Mortgage announced a new service a few weeks back whereby it "developed a GFE worksheet that is formulated to accurately feed fees to the correct GFE boxes" and gave clients a process to utilize this tool. Fifth Third told clients that it "is unable to allow a borrower to change his or her compensation option from the Borrower Paid compensation option to the Lender Paid compensation option. Fifth Third will allow a borrower to change from the Lender Paid compensation option to the Borrower Paid compensation option during the processing of the loan. Changing compensation models is an allowable changed circumstance under RESPA, but it is not permissible to increase Block 1 (Origination charge). Therefore, the Borrower Paid compensation option cannot be greater than the amount disclosed under the Lender Paid Compensation option."
10:44AM  :  Freddie Mac Earns $676 Million in 1st Quarter
Freddie Mac's employees may want a margarita tonight after reporting a $676 million quarterly profit, and indicated it would not seek additional funds from the US Treasury this quarter for the first time since it was taken over by the government nearly three years ago. But Freddie said that over the long term it was unlikely to earn more than the dividends owed to the Treasury on preferred stock issued as part of its bail-out and therefore expected to request additional funds in future periods. The CEO said, "Continued improvements on the employment front and in early-stage delinquencies were positive signs during the quarter, but we believe large inventories of unsold homes and a high number of distressed sales will continue to put downward pressure on home prices in many neighborhoods." (Does he mean Nevada down 59%, Arizona down 50% and Florida down 49% from 2006 highs?) Importantly for the industry, Freddie Mac also said that its requests to banks to repurchase faulty loans declined to $3.4 billion at the end of the first quarter, compared with $3.8bn at the end of the fourth quarter of 2010. More than 40% of loans owned by Freddie Mac were originated after 2009 and those loans have far higher equity and lower delinquency rates than those issued in 2006 and 2007.
10:32AM  :  MBS, TSYs Hold Supportive Levels
Both the 10yr TSY and most of the MBS stack had moved back to opening levels just before the stock markets opened. Since then, stocks opened lower and are showing few signs of rallying. MBS and TSYs have been able to hold supportively at their opening levels. 10yr yields got their bounce just under 3.20 and are down to 3.186. FNCL 4.5 MBS moved from 103-05 to 103-08. At this point, gains are likely to be limited by this morning's best levels in TSYs.
9:25AM  :  TSYs, MBS Back Near Pre-Data Levels
Following the release of a worse-than-expected Jobless Claims report, TSYs and MBS rallied further from their already improved levels this morning. After going out around 3.22 yesterday, 10yr notes began the day around 3.19 and rallied to epic long term technical target: 3.17. Big bounce there and we're back at 3.19. But even if bonds merely hold pre-data levels, it's still quite an aggressive improvement in the context of the recent rally and constitutes a healthy front-running bet for general economic malaise notwithstanding any particular reading on tomorrow's NFP. These are VERY dangerous "snap back" sort of levels, so caution is highly urged. We'd look at NFP as a catalyst that can suggest movement in either direction, but ultimately the guidance required to sustain that directional move is "bigger" than NFP. MBS have gained less aggressively than TSYs this AM with FNCL 4.5's up 2 ticks at 102-05 vs 10yr notes up 7 ticks, dropping the yield to 3.1956. Rate sheets should be improved, but may be delayed as we've lost 5 ticks since 835am highs at 103-10.
8:53AM  :  Trichet Foregoes Mentioning "Strong Vigilance"
HELSINKI, May 5 (Reuters) - European Central Bank President Jean-Claude Trichet did not deploy the phrase "strong vigilance" in his opening remarks at a news conference on Thursday, suggesting a rate rise is not likely next month but may come in July. In the past, the ECB regularly used the phrase to signal a hike was only a month away [nLDE71R1TG] and Trichet did so in March, a month before the central bank raised rates for the first time in two year. "We will continue to monitor very closely all developments," with respect to price stability, Trichet told a news conference after the bank kept interest rates at 1.25 percent EUECBR=ECI. Ahead of the meeting, analysts said a repeat of the language Trichet used in April, when he said the ECB would "monitor very closely" upside risks to price stability, would signal a July move. Euro zone inflation accelerated to 2.8 percent last month, moving further above the ECB's target of just below 2 percent. A Reuters poll last Thursday showed a majority of 76 economists expected the next hike in July although some are tipping June. [nSLASFE7TD] (Reporting by Sakari Suoninen, editing by Mike Peacock)
8:33AM  :  ECON: Productivity Rises Faster Than Expected
* U.S. Q1 NON-FARM PRODUCTIVITY +1.6 PCT (CONS +1.0 PCT) VS Q4 +2.9 PCT (PREV +2.6 PCT) * U.S. Q1 NON-FARM UNIT LABOR COSTS +1.0 PCT (CONS +0.8 PCT) VS Q4 -1.0 PCT (PREV -0.6 PCT)
8:31AM  :  ECON: Jobless Claims Highest Since 8/2010
* US JOBLESS CLAIMS ROSE TO 474,000 APRIL 30 WEEK (CONSENSUS 410,000) FROM 431,000 PRIOR WEEK (PREVIOUS 429,000) * LABOR OFFICIAL SAYS JOBLESS CLAIMS BOOSTED BY ABOUT 25,000 BY NEW YORK'S SPRING BREAK BEING OUTSIDE OF SEASONAL ADJUSTMENT * US JOBLESS CLAIMS ALSO BOOSTED BY AUTO INDUSTRY LAYOFFS NOT ACCOUNTED FOR IN SEASONAL ADJUSTMENTS-LABOR OFFICIAL * US JOBLESS CLAIMS 4-WK AVG ROSE TO 431,250 APRIL 30 WEEK FROM 409,000 PRIOR WEEK (PREVIOUS 408,500) * US CONTINUED CLAIMS ROSE TO 3.733 MLN (CON. 3.650 MLN) APRIL 23 WEEK FROM 3.659 MLN PRIOR WEEK (PREV 3.641 MLN) * US INSURED UNEMPLOYMENT RATE ROSE TO 3.0 PCT APRIL 23 WEEK FROM 2.9 PCT PRIOR WEEK (PREV 2.9 PCT) * US JOBLESS CLAIMS LARGEST SINCE MID AUGUST 2010
7:32AM  :  New MBS Commentary Post

Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Victor Burek  :  "flag. .3 better 4.6 and below...2 better above"
Andrew Horowitz  :  "from American Banker this morning :When long-term interest rates ticked up late last year, it was widely believed that mortgage revenues would modestly decline in the first quarter. Revenues did fall, but the drop-off was more extreme than most community banks expected. In a quarter where most results were consistent with expectations, the precipitous decline from a quarter earlier shocked many analysts and executives and left them wondering how to fill the hole."
Mike Drews  :  "gmac better by .22 on FHA this morning... better by .15 c30"
Daniel Kramer  :  "yesterday, citi got .25 better from morning to afternoon"
Adam Quinones  :  "cant wait to see the COT report this week. Saw short covering all day yesterday and seeing more today."
Andrew Horowitz  :  "the poignant question regarding Bill Gross is whether or not he covered his short positions"
Adam Quinones  :  "it certainly feels like the tide is turning on the market's perspective of econ fundamentals. Can't reiterate this enough though....a sustained move "Down in Coupon" will require a major commitment from bond investors. Managing duration can be done with options and risk can be reduced via spread trades...but eventually real$ will be forced to do something more than the "cheapest to deliver" hedge as the curve flattens and cash flows shorten up."
Jeff Anderson  :  "Morning Team. Green is good. What sort of positioning can we expect today, MG and AQ? Low volume?? I agree with what someone said earlier that even a decent NFP may not hurt MBS' too much after the data the last few days."
Matthew Graham  :  "lol, way to go Ader! : DAVID ADER, SENIOR GOVERNMENT BOND STRATEGIST, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT: "Wow. A sharp rise in new jobless claims even with the trio of excuses now puts four weeks over 400,000 and we'd suggest we're running out of excuses. This has provoked a further bid led by five- to 10-year notes. "The market is clearly discounting a lot of weakness in non-farm payrolls, but it no longer seems just about discounting non-farm payrolls, but a more dire shift.""
Matthew Graham  :  "MARC PADO, U.S. MARKET STRATEGIST, CANTOR FITZGERALD & CO. SAN FRANCISCO: "This weekly claims number, there is a bunch of stuff in there that is kind of screwy in that they are noting a spring break holiday in New York -- I don't know why that has an impact. The change in the benefits program and of course the disaster in Japan having impacted plants that closed down because they couldn't get parts so those people went on jobless claims. So getting a clean number is going to be difficult. We"
Matthew Graham  :  "JOHN KILDUFF, PARTNER, AGAIN CAPITAL LLC, NEW YORK: "Bearish news is hitting the market from every quarter. Germany started us off with a very poor factory reading, the spike in weekly jobless claims, and an, apparently, less hawkish ECB have combined to accelerate and punctuate the sell-off.""
Matthew Graham  :  "BOB ANDRES, CHIEF INVESTMENT STRATEGIST & ECONOMIST, MERION WEALTH PARTNERS, BERWYN, PENNSYLVANIA: "I think we're in a situation where the markets and the Fed have been too optimistic. I don't think we're going to fall off a cliff but the road to real recovery and full unemployment is going to take a long time, and people ought to get back into that mode. "Just to get back to 2007 employment is going to take four years, approximately, and those numbers don't take into account the people "
Matthew Graham  :  "COMMENTS: MICHAEL STRAUSS, CHIEF ECONOMIST, COMMONFUND, WILTON, CONNECTICUT: "You're not supposed to get excited at one-week data on claims, and be leery of claims data around floating holidays. "We are still dealing with the issue of the floating nature of the Easter holiday. That may be a distortion, and secondly as big and maybe even a bigger issue, a lot of areas of the country had some weather problems in the latter half of April. "The Labor Department doesn't come out and say "
Matthew Graham  :  "Here are some comments from Reuters Instant Views on Jobless Claims:"
Matthew Graham  :  "before that was summer 2010 when S&P had it's last major sell-off, moving from 1200 to just under 1100"
Matthew Graham  :  "it was during japan situation Dave"
David Z.  :  "MG what were stocks at last time we were this low? Are we not in a much better position to see better rates now?"
Matthew Graham  :  "people here thought QE2 was about lowering rates"
Ira Selwin  :  "I just mean peoples reaction here right after"
Matthew Graham  :  "it was about reflation, and it worked exceedingly well"
Matthew Graham  :  "QE2 wasn't about lowering rates..."
Ira Selwin  :  "Wish I could find those old posts about qe2 saying how it may take months but it may work"
Gus Floropoulos  :  "Reality is simple, we are the bottom of the trend/range that established itself after QE2, we have to be more defensive at these pivotal points and locktrigger ready"
Matthew Graham  :  "2-3 years, yes"
Brent Borcherding  :  "Anyone feeling in the last 2-3 weeks that the car has started bouncin' & the wheels may just be about to rattle off this recovery?"
Matthew Graham  :  "we've been saying that ever since we got support at 3.70"
Matthew Graham  :  "oh yes, there's a chance"
Brent Borcherding  :  "SOOOOOOOOOOOO, you're saying there's a chance...that this is the beginning of the shift to lower yields?"
Matthew Graham  :  "yeah vic, I don't think NFP is as important as usual tomorrow"
Victor Burek  :  "any thought on that mg?"
Victor Burek  :  "i am thnkn the nfp tomorrow even if strong or better might get discounted since the rise in claims has been quite large since the survey week"
Matthew Graham  :  "we have the happy circumstance of the "lead off" occurring in our favor for once"
Brent Borcherding  :  "So, the continued "possible" coupon shift in process, tomorrow is the day, huh?"
Edgar  :  "Just had to clean the coffee off my computer screen after reading about how spring break in New york caused higher then expected claims. "
Matthew Graham  :  "3.15 is the lower end of technical "zone" btw. It would be a pretty aggressive move if 10's improved too much from there before NFP. "