MBS Live: MBS Afternoon Market Summary
While "record levels" for MBS have been a relatively common occurrence in the past month as Fannie 3.5's have progressively taken baby steps into higher and higher territory, 10yr Treasuries hadn't yet taken out the 9/26/11 "record level" until today. And they obliterated it, falling to 1.617 at the lowest point of the day and not far from that presently, in the low 1.62's. German Bunds laugh at those "high" US Treasury yields, themselves having traded down to the low 1.26's today. Yes, Fannie 3.0 production is ramping up currently, and structurally, rates have room to improve. Several lenders repriced positively today, but just as MBS gains pale in comparison to Treasury gains, so too do rate sheet improvements fall short of MBS Price improvements. Diminishing returns at current levels...

On another note, don't forget that tomorrow begins the two "data-packed" days of the week, though Friday remains the biggie with NFP. Tomorrow is no slouch, however, and although it was easy to lose sight of domestic concerns today, they could be back in the picture tomorrow.
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
104-26 : +0-16
FNMA 4.0
106-12 : +0-10
FNMA 4.5
107-07 : +0-05
FNMA 5.0
108-12 : +0-03
GNMA 3.5
106-16 : +0-16
GNMA 4.0
109-05 : +0-10
GNMA 4.5
109-23 : +0-05
GNMA 5.0
110-20 : +0-03
104-19 : +0-16
106-00 : +0-09
106-24 : +0-05
107-21 : +0-02
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.

2:43PM  :  ALERT ISSUED: Ongoing Potential, But Limited Incentive For Positive Reprices
What a world... MBS are at all-time highs, up about half a point on the day, and rate sheets aren't even a quarter of a point up on the day. MBS continue protesting: "this is all so... so sudden," and would probably appreciate a slower pace in the flight-to-safety rally. Even now, 10yr yields have gone flat to slightly higher since noon, and MBS have outperformed.

Ledges of benchmark stability provide footholds for MBS .

One notable reprice so far today, and despite the "limited incentive" environment, positive reprices are possible. We'd also warn that some lenders have a knack for negative reprices near the end of days like today for "pipeline control" reasons. We don't have any insider information in that regard, but just something to keep in mind if the lender in question is prone to such things.

Fannie 3.5's are in line with all time highs at 104-24. Fannie 3.0's have enough volume to mention, and are up 21 ticks on the day at 102-07. 10yr TSYs are down almost 12 bps at 1.6288. The Euro is in freefall, down to 1.238 now, German 10yr TSYs (Bunds) at 1.27.
11:57AM  :  Pain Trade Continues Grinding Yields Lower, MBS Ground Into Ceiling
Remember when 10yr yields hit 2.40-ish just over two months ago? Then remember when there was some uncertainty as to whether or not the 2.10-1.90 range was a thing of the past just before 10's broke from over 2.2 to under 2.1 in less than an hour? Pain Trade...

Remember when markets tentatively defended a 1.90% floor in 10yr yields in late April/early May, then retreated to defending the 1.80% floor as a "selling opportunity," only to have a bounce higher from 1.80% look like a good call for about 1 session before falling below 1.80% and never really making it back above, thus gently shattering the conceptions of a broader long-standing 1.80-2.10% range? Pain Trade...

Most recently, do you remember how 1.674 was the previous record low (not counting economic prehistory in the 50's, yes, we know) from 9/26/11 and that "surely," if 10's somehow magically approached 1.674 that it would be another great selling opportunity? And remember how we've seen 10yr yields give a half-hearted attempt at a bounce at 1.674 heading into 9am this morning an how we've since ratcheted lower, eventually grinding our way to a new low of 1.627 and current yields in the 1.63's? PAIN TRADE!

Maybe the reason that Treasuries keep acting to prove as many people wrong as possible is that folks are still thinking of them as Treasuries as opposed to how they actually end up trading: as "Diet Bunds." In other words, UST's are all about the spillover effect from European Benchmark debt. In that context, things aren't so painful. The real pain is in watching production MBS with little incentive to move higher from either the primary or secondary markets continue to grind into the ceiling near their all-time highs. For all the gains seen in Treasuries, MBS STILL aren't back to their mid-May highs... THAT'S painful (not the sort of pain we'd really complain about considering we're looking at all-time low rates, but still!). There are some charts showing how the two stack up in the MBS MID-DAY, if you missed it:
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.

Gus Floropoulos  :  "REPRICE: 4:02 PM - PHH Better"
Victor Burek  :  "REPRICE: 3:51 PM - Nexbank Better"
Michael Tadros  :  "REPRICE: 3:33 PM - Provident Funding Better"
Adam Quinones  :  "it's happening for a number of reasons but lower rates won't help"
Adam Quinones  :  "mandatory adjusters are massive"
Adam Quinones  :  "that is the main reason most LOs think Secondary is "Stealing" loan pricing"
Adam Quinones  :  "(more)"
Adam Quinones  :  "servicing would get hammered!"
Ira Selwin  :  "Imagine what below 3.25 would look like. scary stuff"
Jason Harris  :  "Thanks...makes me feel better"
Ira Selwin  :  "Just look at your price difference between 3.75 and 3.625. Still showing a big buydown"
Matthew Graham  :  "not to say someone wouldn't portfolio it, but 3.25 is the new 3.75 from a secondary market liquidity standpoint, at least for now."
Matthew Graham  :  "below that implies 2.5 coupons"
Jason Harris  :  "are you guys able to do better than 3.25% FHA? Not on my rate sheet below that but getting big rebate"
Tom Schwab  :  "REPRICE: 3:06 PM - Franklin American Better"
Brent Borcherding  :  "REPRICE: 3:05 PM - USBank Better"
Dan Clifton  :  "REPRICE: 3:04 PM - NYCB Better"
Matt Hodges  :  "WF approx .25% better"
Clayton Sandy  :  "REPRICE: 1:58 PM - Wells Fargo Better"
Matt Hodges  :  "our turn time has doubled"
Matthew Graham  :  ""room" to reprice, but "incentive?" Anyone have any anecdotes to share about how capacity issues or how busy certain lenders are?"
Andy Pada  :  "This morning rates were definitely not as as good as 5/17-18, but live pricing now is at least 15 - 18 bps better"
Matthew Graham  :  "feel free to infer a "?" at the end of that last chat if you wholeheartedly disagree."
Matthew Graham  :  "starting to review rate sheet data for consumer post and it's looking like we're not quite back to 5/17 - 5/18 rate sheets based on what I've seen so far, but improved on the day."
Andy Pada  :  "Have to lock in freddie more than 30 days because they don't allow you to extend"
Andy Pada  :  "Exactly"
Matthew Graham  :  "104-22 is the new 103-22?"
Andy Pada  :  "Locking in 30 - 40 day"
Jason Adams  :  "Its a slow week in my office. It always seems to be slow this time of year as kids get out of school "
Ted Rood  :  "Seems like MBS's often lag behind treasuries on days treasuries make huge moves. At this point I think it's all about Europe, doubt jobs # will be a big mover unless ridiculously good or bad."
Jay Rafuse  :  "so, is the not so generous rate environment today (even with a plummeting 10 yr yield) a function of hedging against Friday's number perhaps?"
Jason York  :  "not as much interest on 15yr coupons, which is why they don't move as much"
MMNJ  :  "30's are scorching yet the 15's are barely moving.....very interesting"
Matt Devine  :  "no they wont charles. 1% i believe is the max they will allow"
Charles Beasley  :  "Does anyone know if FHA will allow a 3% deductable on the homeowners insurance policy?"
Matthew Graham  :  "volatility into the EU bond market close. EUR= hitting fresh lows as well"
Matthew Graham  :  "must not be a lot of sellers out there"
Matthew Graham  :  "50% takedown is big. usually runs 25-40% Rare to see above 40%"

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