Bond markets put up a decent head fake this morning, looking like they were ready to equivocally trade flat for the rest of the day only to sneak just outside the range at the 3pm Treasury close. MBS unfortunately had to follow and were under ongoing pressure int heir own right from a heavy day of origination supply.
Today's weakness is pretty minor in the short term but completely inconsequential in the longer run. 10 yr yields didn't even hit the high end of a short term range discussed in The Day Ahead this morning. Here's an updated view of the chart in that post:
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
Pricing as of 4:08 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
More New Lows For MBS; Another Notch Higher For Reprice Risk
Fannie 3.5's just hit another new low at 103-17. 10yr yields spiking over 1.97. Still inclined to NOT view this as a fundamental commentary on broader bond markets--more incidental. That said, new lows for MBS = new risks. Things seem to be stabilizing for now, but we'd keep an eye on 103-17 to see if MBS make another new low. Each tick lower effectively increases the chances that we'll see a negative reprice.
Reprice Risk Rising Again as MBS Test Lows
Again, we need to emphasize the narrow range overall. Fannie 3.5's have held within 103-18 to 103-25. But just after the Treasury close at 3pm, yields spiked higher and MBS hit their lows of the day. So far, this just looks like your standard issue 3pm fluctuation the day before big news, which limits reprice risk. Even so, it constitutes a minor uptick in reprice risk, just not especially disconcerting if Fannie 3.5's hold at 103-19 or above.
MBS Fairly Well-Supported. Overall Momentum Fairly Sideways
After falling to their lows of the day around 11am, MBS bounced at 103-19 and regained their footing at 103-21. They've been reasonably well-supported at those levels since then with the "demand" side of the equation better-represented than the "supply" side for the first time today (neither have been particularly weak, just that the market is better bid than offered, finally).
Broader bond markets are now looking determined to go sideways into the close. 10yr yields have bounced noticeably on both sides of a range between 1.963 and 1.953 several times since 11am. Up until then, stock prices and TSY yields had been doing a good job of following each other (stock lever connected). Now that stocks are selling off a bit, bond markets are still sideways, essentially showing us their true intention to hover around current levels regardless of external cues.
Things are pretty uneventful really, with tomorrow's FOMC events on everyone's mind. We wouldn't expect too much drama between here and lock-cut-offs but can't rest completely at-ease with prices near their lows and late-day illiquidity making it easier for fewer trading dollars to have a bigger impact on price levels.
Live Chat Featured Comments
BVG : "REPRICE: 3:59 PM - Interbank Worse"
peter pozzuoli : "REPRICE: 3:59 PM - Flagstar Worse"
Patrick McCarroll : "Mortgagee Letter 09-52 Jim"
Timothy Baron : "Corporate relos are good candidates "
Mike Drews : "i've done 1 within a year, but there has to be a good reason"
Timothy Baron : "There is a mortgagee letter about it."
Timothy Baron : "If the borrwer was current on everything at the time of the short sale, FHA might be okay right away."
Matt Hodges : "3 years, jim"
Jim Leonard : "Can anyone out there do FHA financing right after a short sale. I thought there was a three year waiting period for FHA loan after a short sale."
B-C : "i would guess the only people seeing a benefit is lenders that sell directly to FNMA?"
Matt Hodges : "Gaius - much more concentrated on purchase and our correspondent lenders aren't even offering 2.0"
Ken Crute : "not much of an increase in HARP deals, mainly due to investor overlays "
Bromi Krock : "couple of deals that were dead before came back to life but the continued low rates and pick up in purchase business has really been the main driver in the increased business for me."
Gaius Rossini : "about harp - how much has everyone's harp activity increased since du/lp were updated with the 2.0 specs?"
Christopher Stevens : "Just got word that BofA has terminated all state sponsored mortgage originations in NY (no more SONYMA)"
Ira Selwin : "The loan has pool insurance on it"
Andy Pada : "totally agree with you ABM"
Aaron Buyside Meyer : "It just seems Washington is pissing more people off with announcing this great refi prog but then splitting hairs on which loans can participate"
Aaron Buyside Meyer : "Why don't they make everyone eligible?????"
Justin Bayle : "Jason, error 63 means the loan was sold with some sort of lender credit making it ineligible. "
Tony Cardinal : "or it could be that the loan was sold to Freddie after 05/31/2009"
Tony Cardinal : "pooled with alt a paper and sold to FHLMC in a pool that is not elig for LP"
Tony Cardinal : "could be one of 2 things JA"
Jason Adams : "I have a Freddie Relief loan that is a match on the Freddie site and when I run LP I am getting error 63- Relief Refi-Open Access mortgages must match active FM loan... any ideas? Origination date is 2007, could it be a broken loan that is not allowable for Freddie? Or a mismatch address?"
Matt Sullivan : "and just give that to the second mortgage department?"
Matt Sullivan : "well if the second requires an appraisal but the first does not, couldnt you get the appraisal done non-HVCC?"
Aaron Buyside Meyer : "w or w/out appraisal?"
Matt Sullivan : "any of you guys had any luck with suborinating a second while doing HARP 2.0?"