MBSonMND: MBS RECAP
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FNMA 3.5
95-18 : -0-13
FNMA 4.0
99-29 : -0-10
FNMA 4.5
103-13 : -0-04
FNMA 5.0
106-06 : -0-02
GNMA 3.5
96-28 : -0-14
GNMA 4.0
101-26 : -0-06
GNMA 4.5
105-16 : -0-02
GNMA 5.0
108-12 : +0-05
FHLMC 3.5
95-13 : -0-12
FHLMC 4.0
99-27 : -0-09
FHLMC 4.5
103-08 : -0-05
FHLMC 5.0
106-01 : -0-02
Pricing as of 4:00 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
4:00PM  :   BestEx Teetering Again. Path of Least Resistance
Volatility attacked yesterday but it REALLY attacked today. For the second time this week, home loan borrowing costs have risen about as much as they can without negatively impacting the CURRENT MARKET Best Execution Mortgage Rates. This is the same thing that happened on Tuesday. The abrupt spike in costs is again due to bond market volatility following a "technical breakdown." Our previous guidance nailed it: The path of least resistance is up for interest rates, at least in the short-term. That puts us in a defensive posture for the next 10 to 20 days. And markets demonstrated that again today with sharp increases in costs. You have two choices: 1) lock up and get out now, avoiding any ongoing volatility or 2) try to capitalize on a brief correction. The former is the safe advice. With respect to the latter, there will be ups and downs no matter which direction rates are moving. And in the current environment, those swings can be BIG. You're almost looking at the next level higher in terms of Best-Execution rates, so PROTECT THAT, especially if you can't afford to lose it. For the thrill-seekers out there, or the longer-term, more flexible scenarios, we haven't seen anything yet that kills chances of lower rates by the end of the summer. Bumpy ride in assessing that possibility though....
3:54PM  :  ALERT: Stocks up. MBS Down. Negative Reprices Not Impossible.
MBS prices have technically moved enough to alert you to the possibility of reprices for the worse. Volume and selling pressure for bonds picked up a bit heading into the official 3pm close--not alarming here at month end. But after the volume died down, sellers were left in control and 10 year yields added a few more bps while Fannie Mae 4.0 MBS fell 7/32nds. We should qualify, it REALLY depends on whether a lender already repriced, by how much, and from how conservative of an initial sheet (among other factors), but 7/32nds is technically enough of a movement to justify an alert. Whether that turns out to be the case here and now may be largely dependent on the particular lender. Overall, we're not seeing current movements important to the big picture, but they could be important enough for a few scattered reprices.
3:34PM  :  New Mortgage Rate Watch Post
3:04PM  :  Ex-TBW Chief Sentenced to 30 Years for $3BN Fraud
(Bloomberg) - Lee Farkas, the ex-chairman of Taylor, Bean & Whitaker Mortgage Corp., was sentenced to 30 years in prison for leading a $3 billion fraud involving fake mortgage assets. Farkas, who has been in custody since his conviction in April of 14 counts of conspiracy and bank, wire and securities fraud, was also ordered by U.S. District Judge Leonie Brinkema in Alexandria, Virginia, to forfeit more than $38 million. “I actually don’t believe you accept responsibility for these criminal acts,” Brinkema said today as she handed down the sentence. “This was a very serious series of crimes.” Prosecutors said Farkas, 58, orchestrated one of the largest and longest-running bank frauds in the U.S., which duped some of the country’s largest financial institutions, targeted the federal bank bailout program and contributed to the failures of Taylor Bean and Montgomery, Alabama-based Colonial Bank. Farkas, who was wearing a green jumpsuit with the word “prisoner” stenciled on the back, appeared thinner and his hair darker than during his two-week trial. He read from a statement saying he had to “take risks” because he couldn’t accept the failure of the company. “I believe that everyone at TBW and Colonial Bank were acting together in good faith to help each other,” Farkas said.
2:56PM  :  US Caught China Buying More Treasuries Than Disclosed
The rules of U.S. Treasury auctions may not sound like the stuff of highstakes diplomacy. But a little-noticed 2009 change in how Washington sells its debt sheds new light on America’s delicate balancing act with its biggest creditor, China. When the U.S. Treasury Department revamped its rules for participating in government bond auctions two years ago, officials said they were simply modernizing outdated procedures. The real reason for the change, a Reuters investigation has found, was more serious: The Treasury had concluded that China was buying much more in U.S. government debt than was being disclosed, potentially in violation of auction rules, and it wanted to bring those purchases into the open - all without ruffling feathers in Beijing. Treasury officials then worked to keep the reason for the auction-rule change quiet, with the acting assistant Treasury secretary for financial markets instructing subordinates to not mention any specific creditor’s role in the matter, according to an email seen by Reuters. Inquiries made at the time by the main trade organization for Treasury dealers elicited the explanation that the change was a “technical modernization,” according to a document seen by Reuters. There was no mention of China.
2:33PM  :  INFOGRAPHIC: QE2 in Pictures
(WSJ REAL TIME ECONOMICS) - Matt Phillips and Stephen Grocer put together this graphical look back at what the Federal Reserve’s bond-buying program did and didn’t accomplish. The Federal Reserve‘s second round of so-called quantitative easing comes to an end today, after $600 billion in Treasury-bond purchases over the past eight months. Chairman Ben Bernanke‘s stated goals: lower mortgage rates to boost housing, reduce corporate bond rates to encourage investment and raise stock prices to increase confidence and spending. Markets responded soon after the program was first hinted at by Mr. Bernanke in an Aug. 27 speech in Jackson Hole, Wyo. But the end goals proved more elusive. CHECK OUT THE INFOGRAPHIC: http://blogs.wsj.com/economics/2011/06/30/a-qe2-retrospective-in-pictures/
12:45PM  :  ALERT: MBS Significantly Improved From Lows. Positive Reprices?
While it might not be good for the level of "alert nausea," MBS have improved enough that we could be entering the first stages a time frame where lenders are considering repricing for the better. The actual price improvements in MBS are already a sufficient distance from the lows of the day to justify a reprice for the better, but the questions is more appropriately how much stability will be required and for what length of time before lender's comfort levels allow it. To reiterate, in the best cases, it could be soon. In the the worst cases, not at all. Either way, lender pricing is widely stratified at the moment, leaving room for anything between small "token" reprices and something more in line with the actual MBS gains. To quantify those gains, we're essentially looking at previous lows around 99-24 versus current prices very near par--an 8/32nds gain, or a quarter of a point in terms of analogous rebate (of course lenders don't simply adjust rebate according to MBS Prices. We'd expect defensive, conservative stances to be in effect after the "spooky" morning.).
11:28AM  :  ALERT: Technical Breakdown Prompts Rapid Sell-Off
If you're watching charts, this is old news to you. We're just talking about the technical breakdown in 10yr Treasuries right now, not because they dictate mortgage rates, but because the overall "bond market" has been volatile and operating near longer term inflection points that speak to potential "shifts." In times like these, the value of analyzing MBS charts greatly decreases and underlying benchmarks become much more important. What we're seeing happen this morning is a bond market that came into the day as close to "on the edge" of the recent range as it could be. That was marked by 3.10 in 10yr notes, which was actually broken yesterday, but would need trading action today to actually confirm or reject the breakout. Long story short, the breakout has now been confirmed after looking indecisive leading up to 9:45am Chicago PMI data. After that, the snowball began. Volume ramped up, and yields moved sharply 10bps higher to 3.20. That was the next major technical level for 10yr yields, and in terms of "history repeating itself" is an analogous level to how things happened in 2010. If history continues repeating, more volatility is in store--BIG swings. But even before assessing that possibility, we can at least observe today that 3.20 has held as a supportive ceiling for 10yr yields, effectively stopping the bleeding. It could break again in coming hours or days, but for now, insane volume and a healthy bounce back down to 3.17 suggest that the bond market has pulled into the "pit lane" between sub-3.10 trading and greater-than-3.20% trading. Tomorrow's economic data may help inform a break away from this middle ground, either helping bonds get "back in the race," or retire and head to higher yields. The translation to MBS hasn't been unusually awful so far with 4.0's down just under three eighths (11/32nds) to 99-27. If you had rates well before 9:45am Eastern, reprices remain a risk. If you don't have them yet, expect a big cut to rebate.


Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Adam Quinones  :  "RTRS - OBAMA, SENATE DEMOCRATS WEIGH 7-MONTH U.S. DEBT LIMIT INCREASE AS ONE OPTION-SENATE SOURCE"
Matt Hodges  :  "WF rp"
Matthew Graham  :  "The live update at 2:56pm provides the original story on China's double dipping and here's that supplemental link again that talks about "the rules of the game in a US Treasury auction" http://www.reuters.com/article/2011/06/30/usa-china-treasuries-idUSN1E75T0ZJ20110630"
Matt Hodges  :  "GMAC finally RP"
Adam Quinones  :  "PIMCO perspective on U.S. housing: http://blogs.wsj.com/developments/2011/06/30/pimcos-simon-there-was-never-a-housing-recovery/"
Christopher Stevens  :  "seeing my first reprices for the better"
Adam Quinones  :  "Good Perspective Comment from Larry Gray on the blog: Always a little disconcerting to go into a holiday weekend with wondering if there is anything one should lock. I always operated on the idea if a client wants to lock you lock. However, since we have alot of power over their decision making process sometimes I have been re-thinking that. Not that I do not have loyal clients but I also get so many new purchase loan clients that are shopping rate and it is not always easy to get them to commit"
Adam Quinones  :  "10yrIRS well off recent wides. tighter spreads means more investors are receiving a rate lock = being paid a fixed rate while paying counterparty a floating rate = = locking in to receive recent highs = adding duration = encouraging for our cause. "
Oliver S. Orlicki  :  "pfg +125 total .25% on the day"
Adam Quinones  :  "nice move tighter in swap spreads (tech bounce at +15/).not much duration dumping into higher rates yet. both positive signs of containment"
Matthew Graham  :  "make sure you catch the initial story pdf they link to. http://graphics.thomsonreuters.com/11/06/ChinaandUStreasuries1.pdf"
Matthew Graham  :  "nice article just hit reuters.com for anyone interested in more particulars on tsy auction process. dig it: http://www.reuters.com/article/2011/06/30/usa-china-treasuries-idUSN1E75T0ZJ20110630"
Tom Bartlett  :  "and pf improved almost simultaneously."
Tom Bartlett  :  "saw that BB. Strange timing."
Brent Borcherding  :  "Freedom Mortgage just repriced worse..."
Bill Clark  :  "pf gave said token of .125 better "
Christopher Stevens  :  "Thanks AQ...good advice!"
Adam Quinones  :  "i would take down MBS marks at 930 every morning and then compare to raw pricing. Keep track of spreads and outright levels. This will help you see reprice potential much easier."
Adam Quinones  :  "as a secondary manager it would give you a better sense of awareness if you were keeping track of your lender's pricing strategies vs. MBS indications."
Adam Quinones  :  "you getting those rates in XLS format Chris?"
Christopher Stevens  :  "I can see that in my pricing today AQ. I lock with 6 investors and pricing is all over the place"
Adam Quinones  :  "margin was all over the place"
Adam Quinones  :  "talked to 10 lock desks yesterday"
Matthew Graham  :  "more of a question of how stable for how long vs lender comfort level"
Matthew Graham  :  "you'll see improvements even on stability at current levels"
Christopher Stevens  :  "where would I need to see FNMA 4 in order to see pricing improvement...100.05?"
Matthew Graham  :  "CLOSE/MERGE PUBLIC ENTITIES AND SUBSIDIES: 540 million in 2011, with further 700 million euros in savings in 2012-2015. FIGHTING TAX EVASION: 878 million euros in 2013, 975 million in 2014 and 1.15 billion in 2015. CUTS IN PUBLIC INVESTMENT SPENDING: 950 million euros this year. DEFENCE CUTS: 200 million euros in 2012, and 333 million euros each year in 2013-2015. CUTS IN HEALTHCARE SPENDING: 310 million euros this year and a further 1.81 billion euros in 2012-2015, mainly by lowering regulated "
Matthew Graham  :  "INCREASE SOCIAL CONTRIBUTION RECEIPTS: 629 million euros this year, 259 million in 2012, 714 million in 2013, 1.14 billion in 2014 and 504 million in 2015. To be achieved through an increase in social security contributions and by cracking down on contribution evasion and undeclared labour. "
Matthew Graham  :  "CUTTING THE PUBLIC SECTOR WAGE BILL: 770 million euros in 2011 and 600 million in 2012, 448 million in 2013, 306 million in 2014 and 71 million in 2015. The reduction will come from a curb on hirings and allowance cuts, as well as by shedding all public sector workers employed under temporary contracts. The government will replace only 1-in-10 civil servants who retire this year and 1-in-5 in coming years. "
Matthew Graham  :  "TAX INCREASES: taxes will increase by 2.02 billion euros this year, with additional taxes of 3.68 billion euros in 2012, 156 million euros in 2013 and 685 million in 2014. This includes a 1.37-billion-euro "solidarity levy" charged this year on households, ranging between 1 and 5 percent of income. Other measures include the lowering of the tax-free threshold to 8,000 euros from 12,000 euros, higher property taxes, legalisation of unauthorised buildings, a VAT rate hike on restaurants and ba"
Brent Borcherding  :  "Someone have a link to the austerity measures that were passed?"
Adam Quinones  :  "RTRS - EX-TAYLOR, BEAN & WHITAKER CHAIRMAN FARKAS SENTENCED TO 30 YEARS IN PRISON FOR MASTERMINDING $2.9 BLN FRAUD SCHEME "