104-16 Turned out to be an important level for Fannie 3.5's today. There's more than the usual amount of content in the 'alerts and updates' section below if you're looking to get caught up on how it played out. Long story short, bond markets held up quite well on a Friday that mostly saw money flowing OUT of both sides of the market (i.e. equities and fixed-income both lower in price today). But even the late day volatility left the 104-16 technical level intact through 4pm. From now until MBS go out for the day, it's not out of the realm of possibility to see illiquidity take things a bit lower, but whether or not lenders react to that depends on the lender in question. If it were us, we'd call it a week.
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 4:05 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
MBS Hit Lows After TSY Close, Late-Day Stock Bounce
Equities markets have largely been friendly for bonds today, but a big double bounce on the lows in the S&P right before and after the 3pm Treasury market close has bond markets looking a bit frazzled. S&P futures are up a quick 5 points and 10yr yields are up about 1.5 bps in the same time frame. Thus far, MBS have only shed 2-3 ticks in Fannie 3.5's from 104-19 / 104-20 to 104-17 currently.
After the initial scoot higher, 10yr yields aren't immediately bouncing lower, though MBS saw solid bid-side support at 104-16--same as this morning just before 11am. For all but the jumpiest of lenders and/or most sensitive situations, we'd probably keep the "time to think about locking" line in the sand at 104-16, as it has been since the first update this morning, but it's not out of the realm of possibility that one of the traditionally early-to-act lenders would justify a small negative reprice on such a move. Best bet, keep using 104-16 as a line in the sand, and adjust accordingly based on what you know about the lender in question.
The Facebook Effect: Stock Lever Causing Volatility for Bonds
Stocks fell quickly to the lows of the day as Facebook fell from $42.05 open to the IPO price of $38/share. Bond markets initially firmed up on the stock slide, but have since bounced back into the morning's previous range. Although Treasuries are still in line with what had been their strongest levels before the Facebook shake-up, MBS are less-than-thrilled by the volatility.
Fannie 3.5's briefly surged to 104-22, fell back to 104-17 and are currently at 104-19. Too soon to say how this will shake out, but bond markets clearly remain cognizant of equities. We'd continue to keep an eye on 104-16 as the line in the sand of increasing negative reprice risk in Fannie 3.5 MBS. Although one lender repriced positively already, we'd want to see a break above 104-20 sustained for more than a fleeting moment before feeling optimistic about seeing more.
MBS Bounce at Session Lows, Looking For Support
The stock lever continues to provide some loose guidance for bond markets with a recent run to the highs of the day in S&P's translated to a Treasury/MBS test of the weakest levels of the day. Fannie 3.5's briefly hit 104-16, probably not enough of a slide for much reprice concern, but reprice risks could increase if prices fell back below. We'd also keep an eye on 1.7414 in 10yr yields, a "double top" so far today. This most recent bounce looks like it will stabilize if stocks stay away from retesting their highs, but importantly, it's not yet clear that they'll stay away. Vigilance is a good idea right now. To reiterate, if these technical lines in the sand break down (1.714 in 10's and 104-16 in Fannnie 3.5's), reprice risk is increasing.
Live Chat Featured Comments
Matthew Graham : "post 3pm volatility on a Friday. I'd give it a few minutes to shake out unless you're waiting to lock with one of the jumpier lenders"
Michael Mitchell : "7 Ticks... At what point do we move to scared of Negative reprices?"
Matthew Graham : "RTRS - GERMAN GOV SPOKESMAN DENIES THAT MERKEL HAS SUGGESTED A REFERENDUM ON GREECE STAYING IN THE EURO ZONE "
Matthew Graham : "this one's brand new: "
Matthew Graham : "those wires were a bit earlier, but adding to bond market resilience / stock market nausea"
Matthew Graham : "RTRS- - GERMANY'S MERKEL DISCUSSED WITH GREEK PRESIDENT WHETHER GREECE SHOULD HOLD REFERENDUM ON REMAINING IN EURO - GREEK GOVT SPOKESPERSON "
Matthew Graham : "RTRS - CLEARING HOUSE LCH.CLEARNET TO RAISE MARGINS ON SPANISH DEBT "
Dean Gorenflo : "It never distinguishes between 7 and 13 anyway and always wants a manual U/W"
Dean Gorenflo : "sounds reasonable. I never get anything but a refer when a BK shows on the CB"
Michael Gannon : "anyone ever see on a VA loan that DU referred the loan because of a BK 6 years ago? DU is saying it is within last 2 years and it isnt. discharge date is over 6 yrs ago....only thing we can think of is 3 trade lines that were included in the BK reported last month even though they have zero balances. "
Dirk Postupack : "just in a pre-qual stage......so no......doesn't a repo also show up in public records section of credit report.....been ages since I have had one of these"
Matthew Graham : "P&L indication on credit report doesn't connote an absence of past due balance, in other words"
Dean Gorenflo : "I never see a car repo without a deficiency balance due, even when they sell at auction."
Matthew Graham : "yeah I hear ya, but even if it's written off, it can still be showing as owed. At that point, he'd have to get something from the creditor in question saying "yep we wrote it off and aren't looking for any money from you" (not likely to happen) as opposed to "yep we wrote it off but you still owe us""
Dirk Postupack : "It is showing a bal. owed for 7820. Car was repoed , they believe around 2006 or so..... bottom line was ACCOUNT CHARGED TO PROFIT AND LOSS ( not yelling)"
Matthew Graham : "does it have a past due balance owing to someone, even if not the original creditor? "
Dirk Postupack : " have a guy that is showing an $7820 I-9 account...date opened 9-02 last reporting date 4-12 account was charged to profit and loss....Car Repo...how is FHA going to look at that? "
Rob Clark : "CNBC said this morning that Bono made more money today in his facebook investment that his entire music career."
Sam Baugh : "here you go andrew http://money.cnn.com/galleries/2012/technology/1205/gallery.facebook-ipo-billionaires/?iid=HP_LN"
Brett Boyke : "I think they will make a concerted effort to buy back "
Brett Boyke : "true on the float, I just see them as ubiquitous"
Andrew Horowitz : "I'm not as certain about this one, they came to market with such a huge float, it is difficult to rally the stock"
Brett Boyke : "people will be looking back years from now saying I wish I would have bought FB at $38"
Michael Tadros : "REPRICE: 11:57 AM - Provident Funding Better"
Brayden Alexander : "priced to high is my guess, and by days end maybe we shall see."
Andrew Horowitz : "OMG CNBC is really tripping over themselves over this, "OMG we just broke 38, we just broke 38""
Matthew Graham : "facebook reaction"
Brayden Alexander : "I know it's only been 20 minutes or so, but where is the surge?"
Roger Moore : "and reassign"
Roger Moore : "jd, you can cancel the case #"