MBSonMND: MBS RECAP
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FNMA 3.5
100-29 : -0-06
FNMA 4.0
103-25 : -0-07
FNMA 4.5
105-24 : -0-06
FNMA 5.0
107-21 : -0-06
GNMA 3.5
102-09 : -0-04
GNMA 4.0
105-23 : -0-06
GNMA 4.5
108-01 : -0-04
GNMA 5.0
109-27 : -0-05
FHLMC 3.5
100-24 : -0-19
FHLMC 4.0
103-21 : -0-06
FHLMC 4.5
105-18 : -0-06
FHLMC 5.0
107-14 : -0-06
Pricing as of 3:59 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
3:59PM  :  More Data, More Pertinent Auction, One Day Closer to Jackson Hole
To be clear, we're not continuing to mention Jackson Hole because we look to it as some quintessential answer to the market's problems, simply that--and we say this for everyone's sake--we need to get past it. Because last year's Jackson Hole is widely regarded as the birthplace of QE2 in the media, this year's chat has been built up to epic proportions. The sooner this unknown is taken out of the market, the sooner markets can get back to organically trading data and events. Apart from more grains of sand falling in that hourglass, tomorrow also offers economic data and another auction. This time, it's the more-pertinent-to-MBS 5yr Note. (why more pertinent? 5 years is a lot closer to the duration of a current MBS coupon than 2yrs, so it's a better benchmark against which to compare MBS and movements in 5's are more likely to correspond with movements in MBS). That happens at 1pm. Before that, there's the usual MBA Applications at 7am. Looking for big things from that refinance index. Then the headliner of tomorrow's econ calendar hits at 830am with Durable Goods and the FHFA House Price Index prints at 10am. For the consensus estimates as well as a look at the rest of the week, check the following link:
2:58PM  :  ALERT: Negative Reprices Possible After East Coast Quake
The trading session was disrupted today when a magnitude 5.9 earthquake rattled the East Coast from Virginia to Toronto, prompting evacuation of the Pentagon, U.S. Capitol and many trading floors. Although the immediate impact was positive for rates, the tide has turned and stocks are now rallying toward a test of technical resistance. This positive movement in equities has pushed production MBS prices lower; the Fannie Mae 4.0 coupon is currently -6/32 at 103-26, a key support level. When accompanied by the nervous sentiments surrounding the unusual occurrence of an East Coast earthquake, these price declines are large enough to warrant reprices for the worse. BEWARE.
1:50PM  :  New Mortgage Rate Watch Post
1:15PM  :  ALERT: Strong 2 Yr Auction. MBS Stabilize. Stocks Still a Threat.
Leading up to the 1pm release of the 2yr Note Auction, the S&P index rallied over the important 1150 level. Bonds were slightly weaker as a result with Fannie 4.0's briefly touching 103-29. But the auction results bring a small but welcome boost to bonds. The auction was met with excellent demand with 3.41 dollars bid for each dollar up for grabs, higher than recent averages of 3.19. The high yield came in at .222, in line with expectations as measured by the 1:01pm when-issued yield. Treasuries and MBS got a slight, but noticeable boost as a result. 4.0's are back to vacillating between 103-30 and 103-31. 10yr yields are holding under 2.12, currently at 2.113. Stocks have also fallen to 1148, and the longer they stay under 1150, the better the implication for the stability of the bond market going forward. Most importantly, these auction results and the current reaction in markets means that MBS have been stable long enough, and improved enough for morning rate sheet time that we'll start to see reprices for the better if we stay in this range. A few lenders are already out with improvements.
12:35PM  :  Sideways Ahead of Auction. Bonds Resilient on Stock Market Indecision
As stocks turned away from a break of 1150 in S&P's (don't relax yet though... they're still close at 1147.40) bond markets are staying stable with the 10yr note still near unchanged levels and Fannie 4.0's up 2 ticks on the day at 104-01. We continue to think that a significant break of 1150 could ultimately weaken MBS today, but the more pressing matter could be the response to the 2yr note auction at 1pm. No guarantees it will create movement in either direction, but always a possibility.
11:34AM  :  MBS, TSYs Dancing Around Unchanged Levels as Stocks Stall
1 tick down, 1 tick up... Both the Fannie 4.0 and 10yr note have flickered red to green, green to red more times than a defective string of X-mas lights. Which of those colors ultimately gets the nod continues to seem tied to the fate of stocks. S&P's are dangerously close to breaking higher on the day, currently at 1139.76 with highs in the 1141's just overhead. We get the impression that bond markets are sensitive to a run toward 1150 in S&P's, but as long as that threat is not materializing, losses have been contained. Fannie 4.0's are currently at 103-30, 2 ticks down on the day. 3.5's however are 3 ticks up on the day at 101-06. 10yr yields round out the color spectrum, unchanged at 2.109. Specifically with respect the the 4.0 coupon, looks like we could be seeing a bit of stored energy with the recent narrow sideways range between 103-30 and 104-02. A break in either direction could see extra momentum.
11:24AM  :  New MBS Commentary Post
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Jill Statz  :  "Advancial"
Dan Clifton  :  "anyone know a lender that will do a condo hotel?"
Matthew Graham  :  "slightly better than yesterday, but today is another low volume day"
Samuel Lee  :  "Thanks Steve"
Steve Chizmadia  :  "If clients are happy with the quote they received, no reason not to lock"
Steve Chizmadia  :  "30 days out is a tough call Sam"
Matthew Graham  :  "with respect to steepness of bond market movement (because I see some confusion glancing back on last little bit of chat), 3 things. First of all, 10's still inside the AM range. 2.17 is a pivot (my personal stop-loss on long term floaters actually). Second, note yesterday's "counterattack" chart and you'll see that 10's are trending upward in an exceedingly casual, contained, calm manner. And finally, please note the ongoing discussion on 1150 in stocks. 10's didn't break out of their mid-da"
Samuel Lee  :  "so steve, does that mean keep finger on the trigger? what if escrow is not due to close for 30 day from now?"
Steve Chizmadia  :  "Plus, JW told me 103-26 will hold and we're back above that mark now, so I'm feeling pretty good on my boat"
Steve Chizmadia  :  "I'm following Cap'n Burek. Everything will be locked if we break 2.16-2.17 on the 10 year. "
Matt Hodges  :  ""the underwriting staff will be out of the office the rest of the day as the building has been closed for structural review." our Bethesda corporate office"
Adam Quinones  :  "S&Ps just broke 1150"
Jeff Anderson  :  "So why the bond sell off?"
Jason Wilborn  :  "Under federal law, JP Morgan and Bank of America could not combine because together they would have too large a share of several financial markets in the US. Treasury would apparently work with other government agencies to have those rules suspended and then the new combined bank would sell assets to get back into compliance later. The government’s preference for a deal with JP Morgan rather than a federal takeover may be because it does not want to set the precedent of Washington owning one of"
Jason Wilborn  :  "There is a rumor circulated on Wall St. that JP Morgan (NYSE: JPM) will take over Bank of America (NYSE: BAC) within the week. The government will support the deal with a $100 billion investment in preferred shares issued by the combined entity. Alternatively, the government may guarantee the value of a large pool of Bank of America assets. The word is that Treasury Secretary Geithner has discussed the transaction with JP Morgan CEO Jamie Dimon.The “merger” would completely destroy the value of "
Andrew Horowitz  :  "from American Banker "The shift toward appraisal management companies has raised costs for home loan borrowers, reduced pay for appraisers and hurt the quality of their work, Richard Booth. The fact that these supposedly independent third parties are often owned by lenders infuriates Booth, a certified mortgage banker in New Jersey. His Rolodex of appraisers with expertise in certain areas in useless now and he has "witnessed appraisers who are traveling from out of state and without any basic k"
Adam Quinones  :  "Fed doesnt want to encourage speculation in commodities....but it still happened."
Adam Quinones  :  "that was unintended and more a factor of supply/demand from emerging economies."
Andrew Horowitz  :  "like that yellow stuff gold"
Andrew Horowitz  :  "and commodities"
Adam Quinones  :  "it essentially frees up $$$ to invest"
Adam Quinones  :  "yes..remove an asset from the market, which puts cash on the balance sheet of investors who are then forced to buy further out the risk spectrum (like stocks) "
Adam Quinones  :  "It's called the "Balance Sheet Effect" Andy"
Andy Pada  :  "Simple and basic question: What is the Fed's goal in a bond buying program? What is the intended effect?"
Adam Quinones  :  "More than anything I feel the bully pulpit is the Fed's best tool right now."
Adam Quinones  :  "he may even list out the Fed's options again."
Adam Quinones  :  "Ben cannot ignore expensive food and energy prices because the market knows consumers are being squeezed...that implies he'll be cautious about signalling another bond buying program. I expect him to echo the FOMC statement and say the Fed is prepared to act.... "
Adam Quinones  :  "yes 104 = higher boundary support. Id be more nervous about a breakdown of 103-26 though."
Brent Borcherding  :  "AQ--I'm still interested in your gut feeling as to Friday, I know you said you wouldn't be surprised by anything, but..."
Steve Chizmadia  :  "AQ, is 104 the new pivot?"
Adam Quinones  :  "good observation Brent...1150 is key technical resistance level (62% retracement of all-time highs)"
Brent Borcherding  :  "Doesn't look like S&P like the view after peeking out over 1150...came back to cover."
Alan Craft  :  "Wells better"
Jason York  :  "looks like Wells repriced"
Chris Kopec  :  "I agree, Ray J. 3 Dissents on their last announcement....can't see Bernanke doubling down with QE3 so soon."
Ray J  :  "yeah, i think no QE3 but QE lite to continue. FED will use payments received (from MBS and UST payoffs) to but longer dated securities UST7 and UST10. Call it Operation Twist V.2.0"
Matthew Graham  :  "Indirects have taken about 30% on average"
Matthew Graham  :  "Since March, 3 out of 5 auctions have come in at higher yields than when-issued"
Matthew Graham  :  "average of last 4 Bid-To-Cover's = 3.19"
Victor Burek  :  "mg...what we looking for at auction?"
Brent Borcherding  :  "I don't believe so. I thought FHA allowed HELOC to be rate in term if NOT drawn on for last 12 months."
Victor Burek  :  "i thought they could draw 500 or a 1000?"
Victor Burek  :  "what is the max draw on a 2nd lien h/e that you can take in the prior 12 months and still refi into a fha rate and term?"
Matthew Graham  :  "1142.43"
Matthew Graham  :  "S&P broke out"
Matthew Graham  :  "stocks testing highs of the day now"