Today's ECB headlines lived up to their potential at least in one way: they created volume and volatility. But the volume quickly tapered and the volatility quickly brought bond markets back into rather neutral territory on the week. Bond markets weakened into and after the FOMC Announcement only to strengthen coming out the ECB disappointment. In that sense, they really did "cancel each other out." Trading levels for production MBS coupons are in the same narrow range this afternoon as they before yesterday's FOMC Announcement. Back to the drawing board just in time to contend with tomorrow's key release: The Employment Situation report, aka "NFP" (which refers to the primary component of the report, Non-Farm Payrolls). This is still very much a market moving threat, especially with the Fed staying on hold this week. In other words, an evolving picture of the labor market should continue to help evolve the consensus on impending Fed action.
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 4:09 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
Quick Cautionary Note As We Head Into The Afternoon
We're not sure it will matter much--at least not if current levels hold--but bond markets have weakened somewhat into the afternoon. Fannie 3.0's are now at their lowest levels since this morning's Draghi press conference rally, though we'd note that's a fairly narrow range, and in the zone of most of the recent highs to boot.
The risk is an ongoing deterioration into the 3pm Treasury close and perhaps beyond. Although prices aren't far enough away from rate sheet time, those morning hours had a decidedly more upbeat feel to them as we'd just dodged a bullet of sorts (or "lack of bullet" from Draghi's monetary policy gun).
So simply based on the visceral response we're having to this afternoon weakness, and especially if things continue to slide, we wouldn't rule out a negative reprice at or below current levels, even though we're not expecting that to be a widespread phenomenon just yet. More to the point is that if you were considering locking ahead of NFP tomorrow, it's looking like a good time to do that in light of the fact that positive reprices are looking much less likely than negative reprices at this point.
MBS, Treasuries Continue In Positive Territory as Euro Suffers
Little has changed since ECB Pres Mario Draghi's press conference following the ECB policy statement earlier this morning. If you missed it, the ECB did nothing new and Draghi surprised even the skeptics with just how little he backed up seemingly significant promises made late last week about doing whatever was necessary to preserve the Euro.
The Euro immediately fell to the exact levels seen before Draghi's speech last week and has essentially stayed there for the balance of the morning. Bond markets were much improved in strong volume as the press conference ended. Fannie 3.0's moved up to 104-02 and continue to trade there despite a brief foray higher to 104-05. This puts them in line with the best levels of the day yesterday and leaves the door more or less open for lenders to reprice positively as it suits them.
10yr yields are down to 1.4593 at the moment, better than a 6bp drop on the day. There's no additional scheduled data or events of note for the afternoon and attention should now turn to tomorrow morning's NFP. This doesn't mean that positivity is guaranteed to persist into the afternoon, simply that any negativity would be an incidental side effect of lower volume position-shifting in preparation for tomorrow, unless otherwise noted.
Live Chat Featured Comments
jeff teplitz : "rural development typically will allow less than 2 year work history on a second job."
Victor Burek : "pretty sure you have to prove 2 jobs for 2 years before you can use the income from the second job"
MortgageMan007 : "hey I have a client who is bartending as a 2nd job....taking her FHA....if she's only done it for a year can I count it at all or no?"
rford : "i know its tough for appraisers, and i respect them, but the model is broke"
rford : "its like a juror that already heard about the case for months on the news, do they let him decide on a case when he/ she has already fromed his/ her own opinion"
Matt Hodges : "appraisers would work to list price then"
rford : "therefore they can derive a true market value from the comparable sales in the area without having a number to start with"
rford : "absolutely not MD, in my opinion, the purchase price should be blacked out on the contract when the appraiser gets it"
Mike Drews : "Isn't the true market value what they are paying?"
Michael Gannon : "doesnt collect rent though....so not sure it matters what you really title it as you are hitting with PITI either way"
Michael Gannon : "he doesnt live there but gains a tax write off from the house"
Michael Gannon : "id say investment"
B-C : "hello peeps. quick FNMA question. if a divorced borrower has his own home but has to pay the MTG on his ex-wife's property, the mortgage is only in his name, when doing a refi, is it a 2nd home or investment?"
Eric Franson : "The first one I received was at 8:00. This one was more of a reprice than there standard 'correction' once a month."
Ira Selwin : "I guess it's more of a "correction" due to morning market activity really?"
Ira Selwin : "Yes I see it. I don;t consider those true re-prices as opposed to others, as they're the first rates out no matter what news is coming out. "
Eric Franson : "Ira - did you see the reprice from Wells Fargo at 8:50 CT? I hate sending a reprice notification so early as it confuses the west coast."
Ira Selwin : "REPRICE: 12:29 PM - Chase Better"
Chris Kopec : "Brent....that is what I was thinking too.....+12 on the 3.0 is a nice reaction in itself.....I think in a worst case scenario this gives some ammo to the "float into NFP" argument....which goes against my normal thinking."
Brent Borcherding : "Who knows maybe they are riding the brakes and without NFP tomorrow, today would've been a facemelter."
Chris Kopec : "I was wondering this morning if the upcoming NFP would put the brakes on reaction to the underwhelming ECB news today...doesn't look that way according to the chart."
Matthew Graham : "obviously... huge pop on ECB early, then tapering off sharply after the presser."
Matthew Graham : "close to 1mil 10yr contracts. biggest early morning since early june. late morning hours have been merely "above average""
Gus Floropoulos : "MG, whats volume like so far?"
Matthew Graham : "exactly"
Rob Clark : "If needed or when needed?"
Matthew Graham : "RTRS - SPAIN AND ITALY CALL FOR QUICK IMPLEMENTATION OF MECHANISMS AGREED AT LAST E.U. SUMMIT SO CAN BE USED IF NEEDED "