"Inside Day" is a term that is occasionally used to denote market movement that is relatively more subdued than the previous session. It simply refers to the current trading range falling "inside" the previous trading range with lower highs and higher lows. That was the case today for MBS and Treasuries (and more, we're sure!) today as volume ground along at an excruciatingly slow pace. As expected, it paved the way for slightly exaggerated movements at time, especially into the 3pm Treasury close, but essentially we had a mild rally into lunch time followed by markets basically "going home" in the afternoon somewhere between 2 day highs and this morning's lows. So a slightly positive day for MBS overall, but lacking in potency as far as its contribution to the bigger picture. That could continue to be the case to some extent for the remaining days of the week although the level of activity can't help but pick up from today's.
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 4:06 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
Afternoon Weakness Brought On By Low Volume, Treasury Close
Here's a great example of the perennial discussion of low volume leading to bigger changes in MBS prices on seemingly absent motivation. Indeed, motivation for weakness into the 3pm Treasury close is no more or less than it often can be, but certainly, the volume is significantly lower (this may turn out to be the single lowest day since early April).
With a day and a half of mild improvements behind them, bond markets have some room to free up some cash to put to work elsewhere for the rest of the day without crossing any taboo technical boundaries. MBS are essentially just keeping pace with Treasuries here and none of it is attributable to any headline motivator or fundamental shift in perception or reality--just ebbs and flows, exaggerated by the low volume.
As to whether or not this introduces a major reprice risk, we haven't seen sufficient losses for that and would note that even the volatile trading range established on Friday is fairly narrow as far as volatile trading ranges go. If you consider that the modal (most frequently recurring) highs of thd day were just under 103-22 today and that we're currently at 103-20, a negative reprice seems altogether uncalled for. That said, you can never completely rule out a small risk of minor reprices at a very small subsection of "jumpy" lenders when charts make these shapes. Even then, we might not see a single reprice unless MBS resume selling off and progress steadily below 103-18.
Less Enthusiasm For HARP Due To Stretched Capacity - Fed Survey
On balance, domestic banks continued to report little change in lending standards for prime mortgages and having tightened standards somewhat for nontraditional mortgages over the past three months. Meanwhile, a relatively large net fraction of respondents reported having experienced stronger demand for prime and nontraditional mortgages over the same time period.
A majority of the large banks indicated that they had participated in HARP during the past three months, though only one-third of the other banks reported having done so. About one-third of the respondents that had participated in HARP reported that over the past three months between 30 percent and 70 percent of all refinance applications were attributable to HARP, while an additional one-third reported that between 10 percent and 30 percent were HARP applications. In addition, about two-thirds of those participating in HARP anticipate that more than 60 percent of these applications will be approved and successfully completed.
The July survey also asked banks to indicate to what extent various factors were affecting their willingness or ability to offer additional refinance loans through HARP. A large majority of banks reported that they had restricted their participation in HARP to those mortgages that they already serviced or held, while a smaller majority also indicated that the high volume of refinance applications had exceeded processing capacity.
Many banks also reported that credit overlays that they had imposed on top of the HARP requirements were at least somewhat important factors in limiting their participation--;a significant fraction of respondents reported having been unwilling to offer HARP refinance loans to some customers with high loan-to-value (LTV) ratios, limited or nonstandard documentation of income or assets, or low FICO scores. Almost all of the respondents that reported "Other" as being the most important factor for having been unwilling to offer HARP refinance loans specified that they did not participate in the program at all.
Slightly Positive Drift For MBS Amid Expectedly Light Volume/Volatility
It's completely dead out there. Sometimes we see days/weeks like this ahead on the calendar and can reasonably assume things will be slow in markets, yet sometimes those days/weeks can still surprise us in terms of movement and volatility. Today IS NOT ONE OF THOSE DAYS. It's every bit the vacation week that it looked to be coming into it.
That said, the simple existence of "slowness" doesn't preclude movement in MBS Prices. It just usually makes for a more "drifty" feeling as opposed to "event-driven volatility or directionality." It's a happy coincidence then that today's drifty feeling is in a positive direction with Fannie 3.0's up 5 ticks at 103-21 and 3.5's very close to the 106 handle as well.
There's still nothing else significant on the calendar for the rest of the day, and it's getting later and later for there to be a surprise European tape-bomb. Cruise control into the afternoon unless otherwise noted.
Live Chat Featured Comments
Matthew Graham : "RTRS - FED SAYS RELATIVELY LARGE FRACTION OF RESPONDENTS SAW STRONGER DEMAND FOR PRIME MORTGAGES "
Matthew Graham : "RTRS - FED SURVEY - LENDING POLICIES AT U.S. BANKS GENERALLY EASED OVER THE PAST THREE MONTHS; DEMAND INCREASED SOMEWHAT"
Victor Burek : "REPRICE: 1:46 PM - Nexbank Better"
Eric Franson : "REPRICE: 12:54 PM - Wells Fargo Better"
Rob Clark : "I got one from chase in about 10 calender days"
Brent Borcherding : "Anyone have an idea of how long Chase subordinations are running?"
Caroline Roy : "thanks Peter. got a guy at 44%, but all else looks pretty solid. "
Jeff Anderson : "REPRICE: 12:39 PM - Chase Better"
Peter Bethke : "caroline. GUS pretty much maxes out with a 38 front ratio and I have seen the back ratio approach 50%. My experience has been 38.01% doesnt get GUS approved"
Caroline Roy : "what is the max DTI people see with GUS on RD loans?"
Chip Harris : "I get asked for VOEs all the time. I find it easier to just suck it up and get it rather than wasting more time by fighting it."
Jason Zimmer : "i have TN...annoying, but not a big deal. "
Tony Cardinal : "love the trend from Friday at noon to current..."
Thomas Nelson : "Sorry, anyone get asked for lox's and voe's for a guy who is full time (you can see the hours on the pay stubs for the whole year) because he is making MORE money than last year? Why does this matter? It doesn't matter if you were jobless (only have to have fulltime income for 30 days) anyway."
Thomas Nelson : "Anyone get askes for LOX's and VOE"
Rob Clark : "REPRICE: 11:43 AM - Provident Funding Better"
Jason York : "probjust need a brief LOX explaining his work and situation, but I've done them before, and you should be fine"
Jason York : "no you shouldn't, as long as he still claims that address as his residence, you should be fine"
Jason Harris : "Will I have any concerns about occupancy if wife is not a borrower? Husband is in Afghan"
Andrew Benson : "gm Joel. I've got a spreadsheet as well... it is a great and amazing spreadsheet but still seems to suck when multiple people need to update etc.."
Joel Marks : "Any LOs have great software -- bought or built -- to view and manage their pipelines? I've put together a basic Excel spreadhseet on Google docs which is decent, though too limited. I need to track my files from app to close including key dates and status of conditions. Have tried lots of things and have yet to find anything good for LOs. Oh, and I need online collaboration so my (remote) assistant and I can be on the same page."