MBS Live: MBS Afternoon Market Summary
Despite stronger-than-expected Retail Sales figures, bond markets ratcheted another notch into positive territory earlier today.  The bid was courtesy of flight-to-safety buying motivated by growing debt concerns in Europe.  In fact, German Bunds, the Euro-zone benchmark, hit record low yields today in the 1.6's, making the high 1.9's in US 10yr Treasuries seem cheap by comparison.  Investors got their fill early and quickly.  But by the afternoon, with Europe done for the day and liquidity dried up, bond-bulls were too scarce to make a push for 10yr yields under 1.95%.  MBS kept pace with the afternoon weakness in TSYs, basically giving up earlier gains to sit at unchanged levels into the last hour of the day.
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
103-16 : +0-01
FNMA 4.0
105-17 : +0-01
FNMA 4.5
106-32 : +0-01
FNMA 5.0
108-19 : +0-00
GNMA 3.5
104-32 : +0-01
GNMA 4.0
108-01 : +0-02
GNMA 4.5
109-14 : +0-00
GNMA 5.0
110-30 : -0-02
103-08 : +0-01
105-07 : +0-01
106-17 : +0-01
108-03 : +0-01
Pricing as of 4:05 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.

3:02PM  :  ALERT ISSUED: MBS Give Back Almost All Today's Gains. Negative Reprice Risk
Negative reprices are possible at current MBS levels, though Fannie 3.5's are still 1 tick higher on the day at 103-15. We'd earlier identified 103-17 as the first potential risk level and would like to emphasize just how non-threatening of a sell-off this is. Fannie 3.5's have only really traded between 103-18 and 103-20 (with rare exceptions) since 10am--so being off just a few more ticks is relatively inconsequential. The chart makes things look a bit more dramatic than they are due to the narrowness of the two-session range (103-11 to 103-22).

That said, historical examples of similar price movements have elicited negative reprices from a few lenders. We're not in panic mode, but reprice risk is slightly elevated. There is no "news" or events materially driving this weakness. Volume and liquidity are light and getting lighter.
2:14PM  :  ALERT ISSUED: Bond Market Rally Slightly Winded. Some Pressure From Stocks
We're running out of fingers to count the times that 10yr yields have poked and prodded 1.95% today. Yields can only fail to break lower so many times before they have to go somewhere else. With 1.95% being the lowest level tested since early March and Stocks making up a majority of their losses since the open, why not swing in the other direction?

The "swing" is fairly minor so far and has merely resulted in a move up to 1.963 in 10's. MBS Experienced this pull-back in the form of Fannie 3.5's falling from 103-21 to 103-18 and currently trade at 103-19--not quite enough drama to be concerned about negative reprices. There's a clearly delineated pivot point between this morning's highs (also Friday's) and the rest of today's range. We'd need to be below that pivot point and falling to be much concerned for potential reprices (around 103-17).

Beyond that, nothing too exciting is happening. The range has been narrow and volume on the light side. Those facets of today's trading makes things less exciting, but they also leave us somewhat vulnerable to any higher volume selling pressure into the last few hours of the day. We wouldn't tune out just yet...
1:18PM  :  Spain Worries Spur Bid For Safe-Haven U.S. Debt
(Reuters) - U.S. Treasuries rose on M onday as worries about the euro zone, particularly Spain's rising cost of borrowing, fed demand for safe-haven U.S. government debt.

Spanish 10-year government bond yields broke through the 6 percent mark for the first time since the beginning of December. Spain has acknowledged that it has probably tipped into its second recession since 2009.

That situation drew investors to safe-haven assets like German bunds and U.S. Treasuries, keeping the benchmark 10-year Treasury note yield at 1.96 percent.

"Debt and growth conditions in Europe are weakening and Treasuries have extended recent gains as Spanish bond yields extend recent losses," said William O'Donnell, managing director and head of U.S. Treasury strategy at RBS Securities in Stamford, Connecticut.
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.

Victor Burek  :  "REPRICE: 2:52 PM - Nexbank Better"
LSP  :  "REPRICE: 2:23 PM - Wells Fargo Better"
Brent Borcherding  :  "Perfect contrast, at the end of the day, everyday, it could go either way."
Matthew Graham  :  "granted, it's not THAT scary, but two layers of resistance to get through, "or else..." "
Matthew Graham  :  "http://tinyurl.com/6wn35rq"
Andy Pada  :  "yes, let's see thqt"
Matthew Graham  :  "I can make it look scary if you want. "
Andy Pada  :  "that chart does look encouraging"
Matthew Graham  :  "here you go BB: http://tinyurl.com/7wxgawp"
Brent Borcherding  :  "3.25% here we come!"
Matthew Graham  :  "I'll post a chart. Kinda nice actually, several supportive bounces so far, generally with "lower highs""
Matthew Graham  :  "in it to win it. just need some love from Fed next week."
Brent Borcherding  :  "Long term trend channel?"
Matthew Graham  :  "more on that from MBS MID-DAY: "If the Euro-zone periphery scares you (read: Spanish 10yr yields over 6%), where do you flee to safety? German Bunds? And let's say that at historic lows in the 1.6's German 10yr Bunds are getting a little crowded, then what to do? Don't worry because good old US Treasuries have your back! Fresh off some FOMC-induced gyrations that took yields from 2.07 to 2.40 and back again, 10's are "only" down into the mid 1.9's which is distinctly higher than the last tim"
Brent Borcherding  :  "Yields over 6% for the Spaniards...gonna get ugly for them soon."
Matthew Graham  :  "anyway... What's keeping markets so well bid in light of a big Retail Sales beat? In a word, Spain. "
Andy Pada  :  "Thanks Mike...we are rerunning the LPs now"
Jason York  :  "I don't know if yall remember, but Bryan LaFlamme mentioned something about this about a week ago, that LP was making some changes because of all the cautions that were being sent out"
Mike Ford  :  "LP Open Access "caution" now "streamlined accept"..purely due to LP tweaks Freddie did over the weekend...and HVE in lieu of appraisal too..sweet. Rerun those LP findings people..don't need to go 20yr to get accept anymore looks like and more."
Ira Selwin  :  "FHA Notice for Lenders: In order to allow Mortgagees additional time to adapt their procedures to implement portions of the new guidance found in Mortgagee Letter 2012-03 (ML 2012-03), FHA is delaying the effective date of the following topics from ML 2012-03: • Handling of Disputed Accounts, Public Records FHA Total User Guide Chapter 2, and • Handbook 4155.1 4.C.2.e, Paying off Collections and Judgments. The new effective date of this section is delayed until July 1, 2012. Prior to the effe"
Victor Burek  :  "didnt fha delay the new collections policy?"
Matt Hodges  :  "read ML 12-4"
Matt Hodges  :  "yes, it went up and it's annual MIP, fyi"
rford  :  "i just checked my Wells broker guide and it says the monthly MI for FHA went up on April 9th as well to 1.25%. I have read many times on here that the monhtly MI was not supposed to change until later this year?"
Christopher Max  :  "I have heard from AE's and different blogs that LP was supposed to loosen their guidelines today. "
Edie Clark  :  "Christopher, what was your souce for LP loosening their guidelines...I've received all Cautions on LP Open Access except for one gold standard borrower with low, low dti. Everyone else is Caution. "
Christopher Max  :  "There is no rhyme or reason to these HARP approvals. "
Jason Adams  :  "I just went back and ran 4 LP Cautions and was able to save one with the "new" loosened guidelines..."
Joshua  :  "Thanks Ken, thats what I thought, waiting for the investor guidelines to check overlays..."
Ken Crute  :  "Josh, if the 2nd is an installment loan that sounds like r/t, unless its a heloc with an advance in the past 12 months. check your investor for overlays? they may see it as c/o in their overlays OR uw had a mental slip and may need a tactful reminder "
Joshua  :  "Doing a FHA R/T ref off paying of a 1st and 5 year old fixed 2nd with to a 95% LTV? Underwriter is trying to say its cash-out and limit to 85%"
Christopher Max  :  "I heard that LP as of today was going to loosen up guidelines. Ran a 707 102/125 with 250K in assets (13/19 DTI) and still got a caution. WOW"

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