MBSonMND: MBS RECAP
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FNMA 3.5
96-04 : +0-06
FNMA 4.0
100-09 : +0-04
FNMA 4.5
103-18 : +0-04
FNMA 5.0
106-07 : +0-02
GNMA 3.5
97-16 : +0-06
GNMA 4.0
102-02 : +0-06
GNMA 4.5
105-13 : +0-06
GNMA 5.0
108-02 : +0-01
FHLMC 3.5
95-30 : +0-06
FHLMC 4.0
100-05 : +0-04
FHLMC 4.5
103-14 : +0-04
FHLMC 5.0
106-03 : +0-02
Pricing as of 4:01 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
3:50PM  :  MBS, TSYs Hold Late Day Gains
After the initial post-auction rally, Treasuries began to give back a small portion of the gains, but were soon able to reverse course and have now made it back in line with their best levels of the day. MBS have also reached their highs with FNCL 4.5's currently at 103-17. Not only that, but these levels have been held with a boring degree of volatility. MBS haven't deviated by more than a tick or two since auction time. That's been good enough for us to see more than a few reprices for the better and possibilities remain that we'll see more.
3:47PM  :  New Mortgage Rate Watch Post
2:57PM  :  J.P. Morgan Cuts GDP Forecast. Expect More Downgrades
This isn't surprising because econ forecasters generally display herding mentality when offering outlooks, but these downgrades are developing into a trend. We call it a market-wide correction of "false start assumptions" and we believe there are are more outlook corrections to come (WSJ) - While Macroeconomic Advisers still expect second-quarter GDP to come in at 3.2%, J.P. Morgan economists have just downgraded their forecast well below 3%: From Bloomberg: "The U.S. economy will probably grow at a 2.5 percent annual pace in the second quarter, less then a previous estimate of 3 percent, according to a revised forecast by economists at JPMorgan Chase & Co. in New York." “The main factor behind our revision is weaker output of the auto vehicle sector,” JPMorgan’s chief U.S. economist Michael Feroli wrote in an e-mail note. Part of the slowdown in production is due to supply disruptions stemming from the earthquake and tsunami in Japan, he said. There’s nothing magical about the 3% level, but it may have some psychological value as a rough measure of “trend” economic growth. The average annual GDP growth rate over the past 30 years is 2.7%. It remains to be seen whether the market is priced for such growth in the second quarter. The consensus is still for a bounce-back from weakish growth in the first quarter and then a second-half liftoff.
2:46PM  :  Expect Fed to be on hold after June: Bullard
(Reuters) - St. Louis Federal Reserve Bank President James Bullard said on Tuesday the Fed is unlikely to immediately reverse its ultra-loose policy when its bond buying program ends in June. "A pause give the committee more time to assess economic conditions," Bullard said in remarks that mirrored ones he made on Monday. During a hiatus, the Fed could be expected to hold rates near zero, roll over maturing securities to hold its portfolio at a steady size, and continue to pledge to hold rates exceptionally low for an extended period, the St. Louis Fed chief told a Rotary Club lunch. Bullard, who is not a voter on the Fed's policy-setting Federal Open Market Committee, is considered a centrist on the spectrum of Fed views on the urgency of tightening conditions to keep inflation in check. He said on Monday heightened concerns about European sovereign debt pose a risk to the U.S. economic recovery. Bullard also renewed his call for policymakers to place less emphasis on measures of inflation that strip out volatile food and energy costs. While policymakers traditionally focus on underlying inflation as a better gauge of where prices will be in the future, doing so puts the Fed at risk of appearing out of touch with reality by overlooking the burdens surges in energy and food costs are placing on ordinary Americans, Bullard said. (Reporting by Mark Felsenthal; Editing by Neil Stempleman)
2:07PM  :  Dallas, KC Feds wanted higher discount rate
WASHINGTON, May 24 (Reuters) - Two regional Federal Reserve banks again sought a modest increase in the rate for emergency bank loans but were overruled by those wanting no change, minutes of Fed Reserve board meetings in March and April showed on Tuesday. Directors of Federal Reserve banks in Kansas City and Dallas sought a 0.25-percent increase in the discount rate, but the other 10 regional Fed banks argued the rate should be left at 0.75 percent. The U.S. central bank's board sided with the majority. The Kansas City and Dallas Fed banks have for months sought to raise the discount rate to 1 percent as a step toward moving the spread between it and the benchmark federal funds rate closer to pre-crisis levels. Indeed, Kansas City Fed President Thomas Hoenig has been the only top Fed official to call for an increase in the fed funds rate itself since the central bank cut official borrowing costs to effectively zero. The minutes showed lingering worries about a lackluster recovery. "Federal Reserve Bank directors generally noted that although the economic recovery was progressing, they were cautious about the economic outlook," the minutes said. Some directors saw upside risks to inflation, while others believe higher energy and commodity costs -- coupled with efforts to slash government spending -- posed more of a threat to consumer spending. "Risks included rising commodity and energy prices, which had the potential to dampen consumer spending, and increased fiscal stringency at all levels of government," the minutes said. ((For more stories on Fed policy go to FED/AHEAD)) (Reporting by Pedro Nicolaci da Costa; Editing by Neil Stempleman)
1:19PM  :  ALERT: Healthy 2yr Note Auction May Lead To Positive Reprices
Treasury just auctioned $35 bln in new 2yr notes at a high yield of .560 versus a when-issued yield of .554. Though the high yield did "tail" a bit (come in higher than the WI), the demand was good at 3.46 BTC vs a 5 auction average of 3.286. Other components were in line with recent averages including the 31.1% taken down by indirect bidders. At first there was almost no perceptible movement in TSY yields or MBS prices following the auction, but we've seen 10yr yields come down a few bps now and FNCL 4.5 MBS are up to 103-15. These are the highest levels of the day and any further progress from here or even just an extended time spent at these levels or better could result in reprices for the better from the "early-to-act" lenders.
12:42PM  :  Stocks Turn Negative, TSYs Reluctant to Follow
With the 2yr note auction only 20 minutes away, it's not a major surprise that Treasury yields are less-willing-than-usual to follow slumping stock prices. Even though the S&P is now down to 1316.83 on the day from a high of 1323+, 10yr yields are only fractionally off their highs of the day, down to 3.152 from 3.162. MBS have been a bit more even-keeled, having not moved more than a tick from their current price in FNCL 4.5's at 103-12. The auction results remains the biggest and best candidate to cause more significant movement in bond markets today.
12:16PM  :  Fed Adds GSEs to Reverse Repo Counterparty List
(Reuters) - The Federal Reserve Bank of New York on Tuesday laid out the criteria for government sponsored entities (GSEs) to join the roster of counterparties it could eventually tap to drain cash from the financial system. The New York Fed, in laying out the criteria for GSEs as eligible counterparties to participate in reverse repos, said that among other things the GSE must be chartered by the U.S. Congress, and "be a consistent cash investor in the tri-party repo market ... with an average daily outstanding amount of reverse repo transactions of at least $15 billion for the past three months." Although the New York Fed did not mention them directly by name in a statement on its website, the criteria is most likely to include the U.S. mortgage financing agencies Fannie Mae and Freddie Mac. Reverse repos are one of the tools the Fed has said it can use to tighten monetary policy when needed to help prevent inflation. In a reverse repo, the New York Fed sells securities to financial firms for a set period, temporarily draining excess reserves from the financial system. The New York Fed on Monday added 32 new money market funds to its roster of counterparties. The new funds include the Federated Capital Reserves Fund, BofA Treasury Reserves and the JPMorgan Liquid Assets Money Market Fund.
11:23AM  :  Stocks, Fed POMO, Auction Concession, Pressuring TSYs
A raft of data and impending events to consider just hit the TSY market at 11am. This is normally an hour that sees some movement in yields due to the details the Fed's Permanent Market Operation TSY buying that are normally released at this time. In addition, stocks just put in their most convincing bounce of the day, so the stock lever may be having an effect as well. There was also a headline about the World Bank unveiling a $6 bln funding package for Tunisia and Egypt, though it's unclear as to to the extent this is impacting yields. On a final note, there's the 2yr note auction coming up in 2 hours and TSYs have a penchant for building in pre-auction concessions to make for better bid facilitation at auction time. One, some, or all of the above may be pushing yields higher, but the important part of the story is merely that they ARE higher, having moved from 3.14 to 3.16 in the past few minutes. This is effectively in line with the highest yields seen this morning and thus far has only served to drop FNCL 4.5 MBS to 103-12, in line with their lowest prices of the morning. So everything is still within its range today, albeit at the weaker end. We wouldn't even be surprised to see TSYs try to push even weaker ahead of the auction, but for now, we remain contained. Given that the drop in MBS wasn't even 3 ticks, this should not be enough for reprices for the worse (although we DO have ONE outlier reported as having repriced for the worse). That eventuality is more likely to materialize after the auction or if prices move outside the current range.
11:16AM  :  New MBS Commentary Post

Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Ira Selwin  :  "WF price change"
John Paul Mulchay  :  "pf better"
Terry Colabrese  :  "5th 3rd reprice for the better"
Steve Chizmadia  :  "Interesting. Looks like I need to send some mailers and make some calls"
Steve Chizmadia  :  "Just confirmed on the wholesale side at a low LTV, I can offer 4.375% on 30 fixed with minimal points"
Dustin McAlister  :  "they are. it is ridiculous how good they are today"
John Rodgers  :  "Key Jumbo is a great product. If you're in BBT's market they'll discount Jumbo's 1% to the rate."
Matt Hodges  :  "AE says Key Jumbo 30 is priced better than Agency 30"
Matt Hodges  :  "ST AE on conf call is bragging on his jumbo rates, but they are not live yet in Moretech"
Steve Chizmadia  :  "Dustin, I am going through pricing with my wholesale rep at Suntrust right now. Will update you on what I find out shortly. "
Dustin McAlister  :  "if anyone else has access to their pricing can they confirm they are getting similar pricing with suntrust"
Dustin McAlister  :  "supposedly we contacted them and the pricing is right.."
Dustin McAlister  :  "So no one else thinks 4.375% for a true jumbo 30 year fixed seems crazy? "
Adam Quinones  :  "http://www.mortgagenewsdaily.com/05132011_servicing_reform_mba.asp"
Adam Quinones  :  "This seems inevitable: "One suggestion that came from the panel was the establishment of a Resolution Trust type of entity to acquire troubled mortgages. This would put those loans in the hands of someone with different priorities than the current investor and servicer. ".....ALSO.... Banks are kicking the can down the road with their REO inventory. Balance sheets still have quite a bit of cleansing to do. Offering a "Resolution Authority" would certainly help speed up the bottoming process. A"
Steve Chizmadia  :  "Plaza improvement"
Dirk Postupack  :  "FHA guideline on short sales.............Short payoffs or settlements on a mortgage lien are considered the same as a foreclosure. Short payoffs and settlements on a mortgage lien on the credit report will NOT be eligible for FHA financing for 5 years from the date the settlement or short pay was accepted. •"
Kent Mikkola #353976  :  "FAMC improved pricing"
Adam Quinones  :  "3yrs FHA. 7 CONVENTIONAL"
Victor Burek  :  "same as a foreclosure"
Dirk Postupack  :  "how long befor a a client can purchase a home after a short sale??????"
Adam Quinones  :  "it means less new cash on books. reserves only leaving the system in the sense that dealers are still buying debt from TSY."
Adam Quinones  :  "if oil prices stay high and the margin squeeze tightens ...the market has not fully priced in weakening big picture fundamentals "
Adam Quinones  :  "i think the market is nervous about oil prices and the impact on output/spending/imports"
Jason Wilborn  :  "so the economy "in and of itself" doesnt support stock prices at these levels?"
Adam Quinones  :  "i do."
Jason Wilborn  :  "you think the expiration of QEII will give this downside move more momentum?"
Matthew Graham  :  "Stock lever in play now... 10's bouncing as stocks bounce lower"
Victor Burek  :  "a whopping 3 tic range and they are repricing...very odd"
Victor Burek  :  "wow..better or worse?"
Matt Hodges  :  "BBT rp 11:15"
Adam Quinones  :  "Franklin American Mortgage improved pricing on its conventional conforming 5/1 product although NY properties are not eligible. (FAMC also hopes to roll out a high balance conforming 5/1 soon.) Franklin also reduced the minimum required FICO from 680 to 660 for 95% purchase and R/T refinances for all conventional conforming products. Lastly, the investor reminded clients that "FHA approved lenders that have not obtained their unconditional DE authority by 6/30/2011 will lose their ability to pul"
Adam Quinones  :  "globalization is here. our kids are competing against the entire world. not just their local classmates."
Tom Bartlett  :  "that is a scary proposition AQ. Wish we were more self reliant."
Adam Quinones  :  "overseas consumers are propping us. not US consumers."
Adam Quinones  :  "right now it is the main reason why the US hasnt fallen into depression. Thank you emerging economies!"