MBS Live: MBS Afternoon Market Summary
Bond markets were utterly deprived of excitement in the overnight session until ECB Pres Mario Draghi unleashed his inner Bernanke, boldly declaring that the ECB would do whatever was necessary to preserve the euro, and adding his own brand of flair in saying "and believe me, it will be enough!" That was a relative haymaker for unsuspecting markets, sending the 10yr to stratospherically high (note the sarcasm) levels of 1.445 ahead of the open. Markets soon regained their composure only to be struck again by the upbeat economic data at 8:30am which sent 10's back to 1.445 and helped MBS open in weaker territory. But the proverbial jig was soon up as it became clear that the ceiling was in for longer-dated treasuries after 10's failed to pierce the 1.44+ ceiling after a lackluster 7yr auction. Heartened by this, MBS tightened up a bit into the afternoon with Fannie 3.0's holding a few ticks north of 104-00 with little fanfare into the close. Eyes now turn to GDP tomorrow and more importantly to FOMC next week.
(Read More On Draghi's Tough Talk: HERE)
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
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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.
2:30PM :
ALERT ISSUED:
Fighting Back And Leveling Off After 7-Year Auction
After losing ground outright and vs Treasuries in the earlier part of the session, MBS saw their sharpest move down following the 7yr Note Auction. Roughly 90 minutes later and Fannie 3.0's are back in good shape relative to today's trading range though still down 4 ticks day-over-day at 104-03.
10yr yields haven't improved quite as much, down to 1.4344 after hitting 1.4412 in the wake of the auction. Even so, it's a positive technical development for 10's to continue to hold underneath a supportive pivot point at 1.442. This was the previous all-time low on June 1st, but has been acting as a supportive ceiling for all but a few hours of trading since yields broke through on Monday morning.
With the bounce back for MBS prices and the ebbing of earlier volatility, negative reprice risk has essentially evaporated this afternoon, but we'd continue to offer the caveat of "pipeline control" reprice risk among lenders who are prone to such things and priced aggressively.
10yr yields haven't improved quite as much, down to 1.4344 after hitting 1.4412 in the wake of the auction. Even so, it's a positive technical development for 10's to continue to hold underneath a supportive pivot point at 1.442. This was the previous all-time low on June 1st, but has been acting as a supportive ceiling for all but a few hours of trading since yields broke through on Monday morning.
With the bounce back for MBS prices and the ebbing of earlier volatility, negative reprice risk has essentially evaporated this afternoon, but we'd continue to offer the caveat of "pipeline control" reprice risk among lenders who are prone to such things and priced aggressively.
1:12PM :
ALERT ISSUED:
MBS Hit Lows Following 7yr Note Auction. Reprice Risk Increases
The 7yr Treasury auction wasn't necessarily abysmally awful, but it hasn't been great for trading levels, particularly MBS. Fannie 3.0's are down 8 ticks on the day to 103-31, enough of a gap from morning rate sheet time to consider that some lenders might reprice negatively.
The auction itself tailed by .6bps, not nearly as bad as the last one which tailed 2.1bps, but both garnered a similarly below-average 2.64 bid-to-cover. We can acquiesce to a bit of weakness given the all-time low yields currently in effect, but it's not like markets didn't have an opportunity to price that in ahead of time, so in this case, weakness is weakness.
10yr yields are up to 1.4395 on the day and we'd continue to hope for support in that general vicinity given the previous all-time low and current pivot point at 1.442. If we find 10's breaking higher or Fannie 3.0's breaking meaningfully into the 103's, assume that reprice risk would be increasing moderately.
The auction itself tailed by .6bps, not nearly as bad as the last one which tailed 2.1bps, but both garnered a similarly below-average 2.64 bid-to-cover. We can acquiesce to a bit of weakness given the all-time low yields currently in effect, but it's not like markets didn't have an opportunity to price that in ahead of time, so in this case, weakness is weakness.
10yr yields are up to 1.4395 on the day and we'd continue to hope for support in that general vicinity given the previous all-time low and current pivot point at 1.442. If we find 10's breaking higher or Fannie 3.0's breaking meaningfully into the 103's, assume that reprice risk would be increasing moderately.
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.
Ken Crute : "then the line has been crossed "
Ken Crute : "when the apprasiers slaps a c4 or worse property conditon on it "
Matt Hodges : "and not C4"
BVG : "habitable/As-IS"
Raul Lopez : "Where does Fanniemae draw the line though?"
Raul Lopez : "MIssing a toilet?....... Roof leak?"
Ken Crute : "now you have an unfinished home "
Matt Hodges : "No"
Raul Lopez : "one of the 2 bathrooms gutted is habitable?"
BVG : "habitable/ as - is"
Raul Lopez : "Here is a question for any takers.... Am aware of how picky FHA can be on a purchase transaction with the property condition but; when it comes to conventional, at what point do you say, this property won't pass Fanniemae's guidelines ???"
Brent Borcherding : "Looks like we bounced."
Victor Burek : "no pain coming our way"
Brent Borcherding : "Bounce inside of 2 minutes."
Brett Boyke : "here comes the pain"
Victor Burek : "Santelli gave it a C-"
Matthew Graham : "could be worse, but C, C-"
Matthew Graham : "ugly auction"
Matthew Graham : "RTRS - US TREASURY - PRIMARY DEALERS TAKE $13.52 BLN OF 7-YEAR NOTES SALE, INDIRECT $13.42 BLN "
Matthew Graham : "RTRS - U.S. 7-YEAR NOTES BID-TO-COVER RATIO 2.64, NON-COMP BIDS $8.03 MLN "
Matthew Graham : "RTRS- U.S. SELLS $29 BLN 7-YEAR NOTES AT HIGH YIELD 0.954 PCT, AWARDS 96.12 PCT OF BIDS AT HIGH "
Matthew Graham : "1pm WI - .949"
Matthew Graham : "Treasury Auction Jargon refresher: http://www.mortgagenewsdaily.com/mortgage_rates/blog/242898.aspx"
Matthew Graham : "7yr Auction in 5 minutes. Looking for a 2.75-ish Bid-to-cover based on the past 3 auctions. The last one--lowest yielding in history next to today, was relatively weak, coming in 2.1bps higher than the 1pm when-issued. When-issued currently at .949, but will update that at 1pm and then compare against auction's high yield to determine "tail" or "stop through""
Victor Burek : "should make for good demand"
Brent Borcherding : "Nice back up into auction is all."
Brett Boyke : "smart money"
Christopher Stevens : "I like how the 10YR is staying stable as market jumps on employment/Draghi news. Seems bond market is saying..."thats all BS""
Jason Wilborn : "Draghi blowing smoke"
Jason Wilborn : "a fully intergrated Union but still broke"
Jason Wilborn : "and even if they do, they would have the same problem the US has"
Victor Burek : "it would take years to integrate more"
Jason Wilborn : "the Euro dies"
Jason Wilborn : "so unless they change the structure and create a more integrated (fiscal, monetary, and political) Union"
Jason Wilborn : "the Euro is fundamentally flawed"
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