MBS Pricing Snapshot

There has been a slow and steady unwinding of this morning's flight to safety--nothing too intense--but perhaps noticeable. The big question keeping yields low at the moment is "will Greece exit the European Union?" Between yesterday and today, hopes that Greek leaders could form a government and perhaps work toward a less cataclysmic result were waning quickly. So a few wires late in the session suggesting nothing more than those efforts will continue into tomorrow helped the undwinding process continue to some small extent.

Simply put: the overall trading levels continue to suggest there's little faith in a sweeping resolution for Greece. We've simply seen a minor adjustment from "very very very bad" to something "microscopically less bad but still pretty darn awful." In actuality, the magnitude of the recent moves seen with these newswires isn't worth writing about. The interesting part here is the fact that the moves coincided with the newswires provides valuable confirmation as to just how tuned-in markets remain to the Greece situation.

Speaking of those movements, MBS are only off a few ticks from the highs of the day, up 6 ticks still at 104-07. 10yr yields remain under 1.80, currently 4.8 bps lower vs Friday at 1.7928. Volume has been fairly strong on the day despite the narrow trading ranges.

(Reuters) - Ally Financial Inc's mortgage unit on Monday filed for bankruptcy and the auto lender said it will sell some international operations to help set it on a path to repaying $12 billion in bailout money.

Ally's mortgage unit, called Residential Capital, or ResCap, filed for bankruptcy protection in federal court in Manhattan under a plan that has the support of some of its creditors, although it was still expected to be a drawn-out and litigious process.

At the same time, Nationstar Mortgage Holdings, which is majority owned by Fortress Investment Group, struck a deal to buy substantially all the mortgage servicing and related assets from ResCap for about $2.4 billion, including debt. The deal will make Nationstar the opening bidder in an auction that will be held under bankruptcy court rules.

"The single-most important thing we can do for the U.S. taxpayer is to not put billions of dollars into this business on a going-forward basis," Ally CEO Michael Carpenter said in an interview.

Ally, the former lending arm of General Motors Co, has been besieged in the past few years by losses at ResCap, which was once a major subprime lender and profit engine. The company has considered bankruptcy and other ways to shed ResCap since at least 2009, but has never pulled the trigger.

A bankruptcy of ResCap now will help Ally, formerly known as GMAC, focus on its main auto lending business and put together a plan to pay back U.S. taxpayers.