MBS Live: MBS Afternoon Market Summary
"It's been a weird, choppy, and inconsistent trading day." That assessment from the most recent alert sums up the day quite well.  In fact the whole thing pretty much covered the rest of the day's trading from that point on.  Indeed there was some reprice risk, but nothing "panic-inducing."  Weakness persisted into the afternoon, but 10yr yields still have yet to go over their previous high in the mid 2.06's and that has coincided with MBS generally holding the line at 103-03.  It looks as if today will avoid making any sort of profound comment on broader trends, unless it's to serve as a warning that the ceiling in the mid 2.06's (precisely where we began the week) is about to crack. 
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
103-05 : -0-03
FNMA 4.0
105-08 : -0-02
FNMA 4.5
106-25 : -0-02
FNMA 5.0
108-16 : +0-01
GNMA 3.5
104-21 : -0-03
GNMA 4.0
107-23 : -0-03
GNMA 4.5
109-07 : -0-02
GNMA 5.0
110-27 : -0-03
102-29 : -0-03
104-31 : -0-02
106-11 : -0-01
107-31 : +0-00
Pricing as of 4:06 PM EST
Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.

2:33PM  :  ALERT ISSUED: Reprice Risk Increasing But Not To Panic-Inducing Levels
It's been a weird, choppy, and inconsistent trading day. Even now--as we're about to comment on low MBS prices and increased reprice risk--there's STILL a chance that benchmark 10's will see a big ceiling bounce around 2.06 that ultimately helps MBS put in a similar floor bounce off 103-03 in Fannie 3.5's. In fact, we might even wait to see how that materializes before any sort of panic lock.

That said, current price levels are such that lenders would be justified in negative reprices. Balance that with the fact that rate sheets were generally worse yesterday than the day-over-day change in MBS prices (post-roll) would have indicated. So there may be some wiggle room.

So is this a reprice alert? We're not sure... If so, it's an equivocal one. Fannie 3.5's are off about 5 ticks from rate sheet time, which is historically sufficient for negative reprices from some lenders, but because of the choppiness of the trading day combined with the conservative rate sheets yesterday and as-yet unbroken ceiling of support in 10's (or floor in MBS prices around 103-03) there's enough justification to stick around and fight as well. Bottom line, reprice risk is increased with the latest move down, but not to panic-inducing levels yet. We'll let you know if things change in either direction.
1:19PM  :  ALERT ISSUED: Losses Moderate After Week's Last Auction. Reprice Risk Ebbs
MBS are hitting break-even levels on the day and 10yr yields have fallen from 2.06's to 2.04's after a fairly tepid 30yr Bond Auction. Once again, the statistics were just about average. In fact, the auction was sort of a dud when compared to other Re-Openings.

The bid-to-cover was was stronger than the recent average of all 30yr auctions but weaker than the recent average of reopenings. Indirect participation fell within the same equivocal territory. Yield was right on the screws with 1pm expectations (as measured by "when-issued" trading). Given the fact that 30's rose about 5bps in yield from this morning's lows to discount the auction, the results leave much to be desired.

That's probably why you aren't seeing a more resoundingly bullish response. But the fact that the auction cycle is over for the week, and that no major drama came out of it, is cause enough for bond markets to moderate their previous selling trend to some extent.

Still... the slight moderation hasn't brought 10yr yields back through an approximate pivot point in the low 2.04's, which is fairly negative from a technical standpoint. Reason being: there were high yields yesterday and this morning between 2.04 and 2.045. We broke through those earlier and came back to bounce on them one time as a floor and now again following the auction. That's the sort of "pivot point" behavior that left-unchecked and un-tested, bodes ill for bond markets chances to rally back to stronger levels.

MBS are down only 1 tick on the day now at 103-06, but the jury is still out on the rest of the day's momentum. We'd like to see that pivot point in 10's broken before getting more bullish and a small amount of reprice risk remains at current levels.
12:33PM  :  ALERT ISSUED: Back to "Risk On" Following Bomb Scare. Reprice Risk Rises
We wouldn't believe it if we didn't see it with our own eyes, but it does indeed appear that bond markets paused selling momentum earlier for a bomb scare at World Financial Center bldg 2 in NYC, and now are right back to their selling ways after the package was determined to contain a toy grenade.

MBS and Treasury prices hit fresh lows just now and reprice risk is elevated. Fannie 3.5's are down 5 ticks on the day now at 103-02 and 10yr yields are moving into an important support zone in the mid 2.06's. The weakness may also be partly attributable to a concession being built in for the 30yr Bond auction in about half an hour. A strong result there could help bond markets hold their ground.
11:15AM  :  ALERT ISSUED: More Pronounced Weakness Following Fed Buying; Stock Rally
MBS are hitting their lows of the day and 10yr yields are near their highs of the week. The recent moves can be attributed to several potential developments:

1. Positioning following the Fed's Twist buying that just concluded at 11am. Often causes choppiness and volume spikes. This one has been more negative for bond markets than most.

2. Reaction to large volume futures trades in favor of shorter term maturities.

3. positioning ahead of today's 30yr auction. Normally, there'd be a bit of a discount, but when big futures trades indicate steepening bets in the morning, that positioning can get even more pronounced.

4. Cap this all off with the fact that many were targeting the mid to low 1.9's in 10yr yields as the range where short-covering would be exhausted and many were expected to "re-short" the market.

All that having been said, it's not the end of the world yet, although we're at the weakest recent levels. 2.06-2.07 would be more nerve-wracking support for 10yr yields and MBS should hold up better by comparison anyway. Even so, weakest levels of the day after rate sheets mean negative reprice risk is upon us.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Jason Adams  :  "We don't have an avenue for LPMI loans other than the 3 5th 3rd will do as well. And it seems all of a sudden the LPMI crowd is coming out of the wood work. "
Jeff Anderson  :  "REPRICE: 2:42 PM - GMAC Worse"
Berton McLain  :  "Matt, Quicken Loans will doit, but they do it through the borrower."
Matt Sullivan  :  "anyone have a home for this....freddie mac loan, has LPMI LTV is around 125% credit score is 711....5th 3rd will not take it because the lender paid MI was from PMI Insurance, which IM pretty sure is gone"
rford  :  "thanks MH, i will give that a shot first"
Matt Hodges  :  "my u/w will also accept a letter written by branch manager of bank or financial adviser that sufficient funds were available, in lieu of a bank statement. Sometimes that makes donors feel better"
Ira Selwin  :  "4155.1 5.B.4.d Lender Responsibility for Verifying the Acceptability of Gift Fund Sources Regardless of when gift funds are made available to a borrower, the lender must be able to determine that the gift funds were not provided by an unacceptable source, and were the donor's own funds."
Victor Burek  :  "no..have your client has"
rford  :  "i don't have authorization or the authority to ask the donor for their financials. "
Victor Burek  :  "did the donor get cash for the person they are donating the money too?"
Mike Drews  :  "always get a cashier's check and withdraw slip..never a personal check"
Ira Selwin  :  "Right, but where did the donor get the money from"
rford  :  "the check came from their account and cleared. "
Brent Borcherding  :  "They're right, rford, but I just want you to know that we feel for you. It's difficult and annoying."
Ira Selwin  :  "How do you know it was the donors own funds? "
Ira Selwin  :  "Check 4155.1 5.B.4.d "
Victor Burek  :  "yep..without exception"
Matt Hodges  :  "you should be getting it every time, every loan"
Matt Hodges  :  "that's common"
rford  :  "I don't even have authorization to get the donors bank statment, because they are not iven party to the loan! unreal! yes, fha Ira"
Matt Hodges  :  "correct, rford"
Victor Burek  :  "you always have to show were the money came from"
rford  :  "i just got asked for a bank statment for a donor on a gift to a borrower after sending in a copy of the check, copy of the deposit slip, copy of borrowers new bank statment showing check cleared, and official WF gift letter"
Matthew Graham  :  "interesting timing on that one"
BVG  :  "REPRICE: 2:16 PM - Interbank Better"
MMNJ  :  "is it for FHA only that you need to ddisclose 15 days per diem interest on the GFE, or does that also apply to conventional? I thought it was for FHA only that this was the case"
Lion  :  "My research tells me it was 2.25%"
Lion  :  "Thanks Steve, but I believe the announcement is for the new up-front premium effective 10/4/2010. I need to know what it was before the change. Thanks."
Steve Chizmadia  :  "http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-28ml.pdf"
Lion  :  "What was the FHA Up-front MIP % in December 2009?"
Matthew Graham  :  "RTRS - U.S. 29-year 10-month bond BID-TO-COVER RATIO 2.76, NON-COMP BIDS $5.03 MLN "
Ira Selwin  :  "https://www.efanniemae.com/sf/technology/ou/earlycheck/pdf/ecoverview.pdf"
Matthew Graham  :  "30yr Auction Preview: average BTC's for last 4 reopenings: 2.86. Last 4 total = 2.63. Main point here is, just like with 10's, today's 30yr auction is a reopening and thus more prone to higher BTC's. So we hold it to a higher standard than the simple average of all recent auctions. Indirect bids have been stronger for reopenings as well, meaning the Rickster will give this one a higher grade than I will if Indirects are around 28-30%. That would be strong for 30yr auctions in general, but w"
Chip Harris  :  "Just noticed a Fannie Mae early check in Point. Anyone know what that is?"
Brett Boyke  :  "It was rumored the package also contained conditions from ING on the remaining deals in a broker's pipeline"
Ira Selwin  :  "The building is cleared. According to FOX a grenade found in a package was a toy"
Ira Selwin  :  "might have been a toy grenade"
Matthew Graham  :  "NY Daily News: "Police investigate package sent to World Financial Center with what appears to be a grenade""
Roger Moore  :  "REPRICE: 11:47 AM - NYCB Worse"
Matthew Graham  :  "ha. wire just crossed saying that the most recent correction in the selling pressure for bonds was due to a suspicious package delivered to downtown offices at Nomura. Not "ha" funny, but "ha," bond markets really can't catch a break if that's really the only reason the selling stopped. I'll believe it when I see 10's stampede back over 2.06 though..."

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