Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBS Live Dashboard
MBS Hold Gains Following Econ Data. Low Volatility
Both in terms of implied and realized volatility, things continue to be calm for bond markets this morning. 10yr yields have held inside a range that's just slightly wider than ONE basis point. (1.977 - 1.99) and are currently testing the lower end of that range at the moment.
When 10's are testing the day's lower range limits in terms of yield, MBS stand a decent chance to be testing the upper limits of their daily range. This is indeed the case with Fannie 3.5's currently at the top of their range, up 5 ticks on the day at 103-18. Here too, we see price action very well contained so far today. Both 10's and MBS trade inside yesterday's post-auction highs and lows.
If any of the upcoming Fed speakers say something that moves markets, it would be a surprise. More possible is a bit of movement after the Fed's Treasury purchases wrap up at 11am. From there, Greek PSI headlines remain a possibility, but unless that happens, markets thus far seem content to traipse aimlessly sideways at the week's best levels.
Speaking of "week's levels," if we end the day in current territory, it will be as if the week never occurred as we're currently in line with last Thursday's closing levels.
New Home Sales Fall 0.9% In January
Sales of new single-family houses in January 2012 were at a seasonally adjusted annual rate of 321,000, according to
estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 0.9 percent (±16.6%)* below the revised December rate of 324,000, but is 3.5 percent (±17.6%)* above the
January 2011 estimate of 310,000.
The median sales price of new houses sold in January 2012 was $217,100; the average sales price was $261,600. The
seasonally adjusted estimate of new houses for sale at the end of January was 151,000. This represents a supply of 5.6
months at the current sales rate.
ECON: Consumer Sentiment Revised Slightly Higher
- RTRS- US CONSUMER SENTIMENT FINAL FEBRUARY 75.3 (CONSENSUS 73.0) VS PRELIMINARY FEBRUARY 72.5
- RTRS- CURRENT CONDITIONS INDEX FINAL FEBRUARY 83.0 (CONSENSUS 80.3) VS PRELIMINARY FEB 79.6
- RTRS- CONSUMER EXPECTATIONS INDEX FINAL FEBRUARY 70.3 (CONSENSUS 68.5) VS PRELIMINARY FEB 68.0
- RTRS- 12-MONTH ECONOMIC OUTLOOK INDEX FINAL FEBRUARY 82 VS PRELIMINARY FEB 82
- RTRS- 1-YEAR INFLATION OUTLOOK FINAL FEBRUARY 3.3 PCT VS PRELIMINARY FEB 3.2 PCT
- RTRS- 5-YEAR INFLATION OUTLOOK FINAL FEBRUARY 2.9 PCT VS PRELIMINARY FEB 2.9 PCT
- RTRS- CONSUMER SENTIMENT INDEX AND CONSUMER EXPECTATIONS INDEX BOTH AT HIGHEST SINCE FEB 2011
MBS Trading Near Yesterday's Highs After Quiet Overnight Session
Fannie 3.5's traded in a range of 103-13 to 103-18 yesterday afternoon and are holding the same range so far this morning. Treasuries were contained in a fairly tight range overnight, drifting up to 2.01 in 10yr yields but returning to high 1.9's in the hour before the New York open on comments from German FinMin Schaeuble that Greece may need more help before 2020 as well as Fed's Bullard on CNBC (he'll also speak later today) speaking casually about QE3 in the event of economic deterioration.
Volume was decent, but only incidentally so, as Treasury futures are beginning the process of rolling March deliveries to June (similar to the roll for MBS, but every 3 months instead of every month).
The first item of significance on the economic calendar will be Consumer Sentiment at 9:55am followed closely by a somewhat less significant New Home Sales report at 10am. There's a smattering of Fed-Speak later in the day. Beyond that, there's headline risk out of Greece as the potential for news regarding private sector involvement (PSI) begins in earnest today. We're not sure if we'll see anything substantive or if there will be any news at all. The relevant story on the topic is included in "The Day Ahead," linked below.
Featured Market Discussion
Matthew Graham : "RTRS- US JAN SINGLE-FAMILY HOME SALES -0.9 PCT VS DEC +1.9 PCT (PREV -2.2 PCT) "
Matthew Graham : "RTRS - US JAN SINGLE-FAMILY HOME SALES 321,000 UNIT ANN. RATE (CONS 315,000) VS DEC 324,000 (PREV 307,000) "
Matt Hodges : "interesting; methinks they are influenced by the media's portrayal of the economy"
Matthew Graham : "RTRS- THOMSON REUTERS/U. OF MICH CURRENT CONDITIONS INDEX FINAL FEBRUARY 83.0 (CONSENSUS 80.3) VS PRELIMINARY FEB 79.6 "
Matthew Graham : "RTRS - THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT FINAL FEBRUARY 75.3 (CONSENSUS 73.0) VS PRELIMINARY FEBRUARY 72.5 "
Dmitriy S : "99% of the people I knew that left to BofA are now all at different lenders. The scariest thing about BOA in the NY market is that when you try to refinance a loan from BOA to another lender, there are only 2 people working the CEMA dept for all of NY... The turn time is ~120 days"
Tony H : "BofA was known for originating pretty clean deals, but that rep changed a little with CW. Deal was encouraged, but not forced. BofA closed it's broker business 6 months before announcing the CW deal...they were preparing."
Daniel Kramer : "when BoA bought countrywide, didnt the goveerment cover a certain portion of the losses for BoA in order to buy that mess? are most of the problems from the CW loans they bought, or was BofA's own loan bad too?"
Tony H : "I agree BofA should leverage its production power, but they have to consider that they bought a company that spent years juicing values and incomes. Sending business to Freddie when Fannie won't take it only works for a while...remember TBW...I think Dave Stevens name was mentioned in that mess too."
Brent Borcherding : "Good insight, AP...it's appreciated."
Andy Pada : "Agreed. I have suggest self-insurance as an option but Agencies say "no" because of Charter requirements for mortgage insurance."
Matthew Graham : "One mortgage melt-down later, everyone wants a buck from the next guy in the value chain... MI companies being more strict, Fannie doing the same, BofA not wanting to play ball with that.... This sort of crap is an inevitability. More compromise needed in general"
Andy Pada : "Yes MG, but Fannie Mae did not help with the 90 day repurchase requirement. And this is the source of BoA's decision with Fannie"
Matthew Graham : "OK, so I just inferred from your last chat AP that it is indeed the MI companies that are overly aggressive with cancellations. Seems like Fannie is just doing their job, even if it's more aggressive and "by the book," than they may have done it in fatter times"
Andy Pada : "@KC, MI companies are insurance companies with capital requirements who are also responsible to shareholders. They will do everything to not pay claims nd reduce their capital. Look at RMIC and PMI who prior to being taken over by certain states, issued the most rescinds."
MMNJ : "they always follow suit with each other -- it is like when one announces loan limit increases....it's one playing a game of chicken with the other to see who goes first"
Matthew Graham : "that's just it... there's a problem with Fannie. So you either have to assume to this bodes ill for Freddie, or they'll follow suit, or Fannie is completely in the wrong and everything will be sunshine and lollipops with Freddie"
Andy Pada : "Let's say that you have a legitimate difference of opinions with MI cancellation. MI company won't budge. You now have to sue the MI company which will take more than 90 days. in the interim you have to repurchase the loan. Therefore on a $100,000.00 loan with 12% coverage, the lender has to repurchase the for the amount of 100,000.00"
Dmitriy S : "Since Freddie is also owned by the govt, wouldn't you think that they would sooner or later get the same 90 day buy back policy that Fannie now has in place?"
Ken Crute : "but if FNMA is buying the loan, assuming it has the coverage, then the loan looses the coverage.... why not send it back? "
Andy Pada : "Absolutely. Remember, Fannie repurchase policy is 90 days. If you can't resolve the MI cancellation with the MI company in that time period, you have to repurchase or be subject to being in breach."
Matthew Graham : "so you think that Fannie's buybacks based on MI-Cancellations is overdone? "
Andy Pada : "I think BoA has every right to exercise its production power. I hate to admit it, but I am hoping for "trickle down" benefits. The MI situation is a mess. I would bet that if you polled the business owners on this site, 100% of them will have had a repurchase issue based on MI being cancelled. "
Matthew Graham : "I'm gleaning that you view BofA as more righteous in this matter AP?"
Andy Pada : "I know David Stevens has had conversations with DeMarco on the issue of repurchases and its effects on the small lender"
Andy Pada : "I am happy to let BoA fight this fight. And if there is some sort of compromise, I only hope it applies to all lenders - big and small."
Andy Pada : "this only gives more fuel to the bad bank/good bank scenario wherein Fannie is the former and Freddie the latter"
Andy Pada : "BB, I hope BoA makes headway on the MI issue. We all know that MI companies are rescinding policies for "foot faults." If no MI, automatic repurchase. That is simply not fair."
Andy Pada : "FHFA response as noted in Jann Swanson's report. They don't care because Fannie and Freddie one in the same."
Brent Borcherding : "AP--What's your take on this situation?"
Matthew Graham : "also, for anyone who didn't hear: http://www.mortgagenewsdaily.com/02242012_bank_of_america.asp"
Matthew Graham : "AP, you mentioned FHFA response? "
Andy Pada : "This BoA stance with Fannie Mae is becoming more and more interesting. Personally speaking, I support BoA's rationale for its decision. Even more interesting is FHFA's response."