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FNMA 3.5
102-23 : -0-02
FNMA 4.0
105-00 : -0-01
FNMA 4.5
106-17 : -0-01
FNMA 5.0
107-28 : +0-00
GNMA 3.5
104-06 : -0-02
GNMA 4.0
107-07 : +0-00
GNMA 4.5
109-02 : +0-01
GNMA 5.0
110-28 : +0-02
102-18 : -0-02
104-26 : -0-01
106-00 : -0-01
107-11 : +0-00
Pricing as of 11:00 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBS Live Dashboard.
10:05AM  :  NAR: Existing Home Sales Up for Third Month (+5.0%)
The latest monthly data shows total existing-home sales1 rose 5.0 percent to a seasonally adjusted annual rate of 4.61 million in December from a downwardly revised 4.39 million in November, and are 3.6 percent higher than the 4.45 million-unit level in December 2010. The estimates are based on completed transactions from multiple listing services that include single-family homes, townhomes, condominiums and co-ops.

Lawrence Yun, NAR chief economist, said these are early signs of what may be a sustained recovery. “The pattern of home sales in recent months demonstrates a market in recovery,” he said. “Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”

Total housing inventory at the end of December dropped 9.2 percent to 2.38 million existing homes available for sale, which represents a 6.2-month supply2 at the current sales pace, down from a 7.2-month supply in November.
9:25AM  :  ALERT: MBS Fight to Hold Ground, Eyeing Support Levels in Treasuries
The Day Ahead post in the MBS Commentary channel is linked below and gives a good backdrop for this morning's weakness. In it, we mention 10's rising over 2% being a problem for MBS in the short term and indeed we're seeing that play out currently as 10's are at 2.016 and Fannie 3.5's are down to 102-22.

We wouldn't read too much into the actual 2.000% level in 10 yr yields as they've made it quite a point to disregard the whole number with an almost disdainful indifference in the past. So far this year, we've seen highs at 2.012 and 2.021 on consecutive days (1/4-1/5) in increasing volume. 1/6 saw yields climb as high as 2.046, but closed lower, in decreasing volume, leaving 2.021 looking like the best candidate for support.

Interestingly enough, the highest 10yr yield seen this morning is exactly 2.021. Remember, that doesn't mean we should EXPECT it to hold, but rather that if it is broken, A) that could present a somewhat significant technical signal for further weakness and B) the next piece of information from a pure yield level perspective suggests another potential support level in the 2.04's. We'll cross that bridge if we come to it though... So far, holding under 2.021, and MBS show their appreciation by bouncing back from previous lows at 101-19 (up another 2 ticks as I type, to 102-24 now). MBS should continue to be relatively "happy" if 10's continue to stabilize.
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "in the situation I referenced below, that would be closer to the relatively non-existent side whereas we saw a lot of 1.0+ when 3.5's were coming into fashion"
Matthew Graham  :  "almost non-existent in rates going into actively traded MBS pools. I've only noticed gaps when an MBS coupon is still in "up-and-comer" status."
Adam Quinones  :  "mandatory one-off's (flow) almost not even worth it."
Adam Quinones  :  "spread between BE and Mandatory has shrunk considerably over past year Sung."
Adam Quinones  :  "the extra loss of pricing can reflect a lower position in the supply chain and a more expensive g-fee multiple..but I think we're seeing other lenders doing what Wells has been doing since last summer. Hitting the servicing values that make up half of your rebate."
Ira Selwin  :  "There's more to the story than just that Sung. Does your company hedge?"
Sung Kim  :  "what do you think the pick up is if my secondary is showing best efforts pricing and delivering AOT/Mandatory?"
Matthew Graham  :  "unless you're actually seeing 85-100 specifically attributed to g-fee across the board, those cost increases are more likely given as part of a range, as a .125% difference in rate is roughly in that range at lower rate levels. .4-.5 seems to be an average buydown/up more frequently seen above 3.875% these days (maybe 4.0% today)"
philip mancuso  :  "hey mg. i'm struggling a bit with the quasi g-fee increase. shouldn't the hit be closer to .40. why are we seeing 85-100? Am I wrong or are they adding a buffer to correct for missed delivery on older loans?"
Mike Drews  :  "in the short term, i'm thinking of Feb locks"
Mike Drews  :  "the 10 yr and 3.5....when you look at 3 month charts, we've had slight breaks of this magnitude and have gotten sucked right back in to the channel....but i'd say we're in the danger zone."
Matthew Graham  :  "10's/MBS potential channel breaks"
Christopher Stevens  :  "MD- what are you analyzing?"
Mike Drews  :  "anyone else analyzing long term charts this morning?"