Once again bond markets came into the session at better levels achieved during overnight trading. In fact, things were looking up ever since ex-Greek PM Papademos noted that a Greek Euro-zone exit was a real risk. Everything since then has been a continuation on that same theme, culminating in the Euro hitting multi-year lows and bringing 10yr yields down 1.71% mid-day. MBS hit 104-19 at their highs (Fannie 3.5's) but fell to the 104-10 pivot point by 4pm. 10yr yields rose to test their 1.75% pivot point into the stock market close. Trough to peak, S&P's put in a massive 23 point gain.
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 4:04 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 Selling At Stock Market Close. Additional Reprice Risk
MBS jumped off a bit of a cliff in the past few minutes and are now back into y'day's territory. Risks of negative reprices are incrementally higher than last check. Fannie 3.5's down to 104-08. 10yr yields up to 1.7466.
Late-Day Stock Lever Hurting Bond Markets. Reprices Reported
Fannie 3.5's had been toeing the line at the 104-12 'line in the sand' and recently broke a tick lower to 104-11. One of the 'early crowd' lenders just repriced for the worse, and a few others in that same category might be having similar thoughts. MBS are basically at the lows of today's session and the highs of y'day's. Tough call for some of the more conservatively repricing lenders, but moderately elevated risk.
MBS Steady In Narrow Range Following 5yr Auction, Threats on Horizon
There are a few things working against bond markets at the moment, not the least of which is the fact that they've rallied rather ferociously earlier this morning and are showing signs of tiring. But like the rally itself, those "signs of tiring" have more to do with what's going on in correlated markets as opposed to bond markets themselves. In other words, if the proper cues were given from stocks, the Euro, and European bonds, then US Treasuries and MBS might not look so exhausted.
But as it stands, the aforementioned 'usual suspects' are doing more to put up road blocks for advancing bond markets as opposed to waving them through recent resistance levels. The Euro saw it's lowest bounce of the day around 12:30pm New York time. Surprise surprise, so did stocks. That rebound in "risk-on" (and believe us, we use the term 'rebound' very loosely) has translated to a bit of momentum for stocks and a bit of sideways indecision for bond markets.
Basically, the cues are not presently there for bond markets to keep on rallying. The 5yr Auction was mostly a non-event, but wasn't a net-positive for longer-term yields. Perhaps the biggest consideration at the moment is that the Fed is buying (scheduled "twist" buying) 6-8yr Treasuries at the moment, which we're tempted to credit with keeping the mid-to-long end of the yield curve a bit better-sponsored than it otherwise might be.
While we certainly can't predict or know what will happen at 2pm when that buying is done, we are quite interest in what markets do at that time, if anything. If stocks and the Euro continue to recover, and Treasury yields continue holding some sideways ground at current levels, we could be looking at the best levels of the day as a thing of the past. Then again, a Euro-zone official might say something interesting that counteracts any of this potentially pent-up negative energy.
Either way, we'd keep an eye on an MBS pivot at 104-14 in Fannie 3.5's, and are especially interested in how it's doing in about 25 minutes from now. If prices fall decidedly lower, lenders would likely be considering negative reprices with a break of 104-12. In other words, a break below 104-14 means it's time to pay closer attention, and a break of 104-12 would warrant an increasing level of concern.
Live Chat Featured Comments
Victor Burek : "go figure..Santelli B-"
Matthew Graham : "yeah, B- with a bit of a tail."
Brent Borcherding : "Solid B?"
Matthew Graham : "pretty much on the screws"
Matthew Graham : "RTRS - US TREASURY - PRIMARY DEALERS TAKE $17.77 BLN OF 5-YEAR NOTES SALE, INDIRECT $14.87 BLN "
Matthew Graham : "RTRS - U.S. 5-YEAR NOTES BID-TO-COVER RATIO 2.99, NON-COMP BIDS $49.50 MLN "
Matthew Graham : "RTRS- U.S. SELLS $35 BLN 5-YEAR NOTES AT HIGH YIELD 0.748 PCT, AWARDS 95.77 PCT OF BIDS AT HIGH "
Matthew Graham : "5yr auction coming up, recent average BTC = 3.00 and WI currently trading .746"
Jason York : "I have the transcripts, but they have 4 other rental properties, so we need the Schedule E break down"
John McClellan : "i have turbo tax and they keep the returns for you"
Jason Harris : "He can get transcripts by calling 800-829-1040....they will fax while he is one the phone...real easy. But actual returns...not sure"
Brent Borcherding : "Log into turbotax from any computer and get a copy."
Jason York : "anyone have any ideas for this? - I have a customer that just moved back from overseas with the military, and filed their taxes with TurboTax, but it was only save on a computer that is being shipped with their remaining items, and won't be here for about 6 weeks, is there any way we can get a copy of their returns from the IRS or anything?"
Matthew Graham : "RTRS- FINNISH PM: DON'T EXPECT DEEP DISCUSSION ON EURO BONDS ON WEDNESDAY "
Matthew Graham : "plan is the plan. Plan goes ahead as planned in June. Tonight is just a nice relaxing dinner among friends. We'll probably reiterate crap that we've already said and maybe do a backrub circle since we've all been so stressed out about this whole EU experiment."
Brett Boyke : "well what is the plan then?"
Matthew Graham : "RTRS - GERMANY'S MERKEL SAYS NO DECISIONS EXPECTED AT TODAY'S SUMMIT "
Matthew Graham : "RTRS - BELGIAN FINANCE MINISTER VANACKERE SAYS IT WOULD BE IRRESPONSIBLE TO SAY WE DON'T HAVE A CONTINGENCY PLAN FOR GREEK EURO EXIT SCENARIO "
Matthew Graham : "ongoing clarification on Euro contingency plans... this is getting comical really..."
Jason York : "correct, unless your lender has an overlay"
Scott Valins : "ok so even if high LTV DURP and no current escrows they don't have to escrow?"
Jason York : "yes, or if their current loan isn't escrowed, in which the LTV doesn't matter"
Scott Valins : "hey guys DURP at 78 LTV I can waive escrows correct?"
Matthew Graham : "shenanigans, indeed! I mean, it's not like it's some epic breakout, but 2 Year low for the Euro, we gotta call at least a little bit of shenanigans"
Jeff Anderson : "Shenanigans!"
Matthew Graham : "Ongoing response from officials to the story from 9:02AM in the live updates RTRS - GREEK FINANCE MINISTRY SAYS EUROZONE MEMBER STATES WERE NOT ASKED TO PREPARE PLANS FOR GREECE TO EXIT EURO "
Matthew Graham : "potentially interesting chart overlaying Bunds, TSYs, Euro, and S&P in various combinations, here: http://www.mortgagenewsdaily.com/mortgage_rates/blog/260414.aspx"
Jason York : "that must be a lender overlay"
Joe Daquino : "I am curious as to how you guys can do it and we can't......I am licensed in Colorado and would like to do the loan but our IRRL guidelines say that VA High Balance is not allowed."
MMNJ : "I can help you Joe"
Joe Daquino : "Can anybody do a VA High Balance IRRL in Boulder County, CO.?"
Mike Drews : "almost too busy to type "yes""
Michael Gannon : "is anyone else massively busy? almost busting at the seams even?"
Brent Borcherding : "You got it Jason. We aren't seeing income growth, but lower rates equate to lower debt payments...add in the aforementioned lower commodities...that is what they call a balance sheet recovery, right?"
Jason Harris : "Agreed but I do not think equity or bond markets will reflect until Europe washes out....as for benefits....lower commodity prices and the help that comes with the gradual correction in consumers balance sheets that low rates bring"
Victor Burek : "the bigger benefit is the stronger dollar brings commodity prices lower"
Brent Borcherding : "I personally believe, completely making this up as you know, that what ever perceived weakness the Europe mess would/should cause the US economy will be outweighted by the benefits realized with even lower short term and long term borrowing rates. I think we're getting close to a turn around for the US."