It's not so much that low volume CAUSED MBS to fall, but rather, it provided an environment in which various trading levels, including MBS, could be more easily influenced. Using 10yr Treasuries as a guidepost, bond markets saw that a break below 1.63 (somewhat of a technical level) wasn't happening and headed the other direction into the 3pm Treasury Close. An incredibly dead 2 hours from 12-2 gave way to a slight increase in volume and the smallest of mini-snowballs of selling up until Treasuries and MBS alike leveled off from 3-4pm. MBS are now sitting near their weakest levels of the day in excruciatingly low volume, still susceptible to volatility in the final hour.
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 4:08 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
Low Volume Volatility. MBS Weaker But Outperforming
On a day like today, what would be an average few minutes of volume is instead a noticeable volume spike. Thought of more objectively, a certain amount of buying or selling interest in bond markets might be another face in the crowd on a busier day, but it stands out on slower days. This phenomenon essentially accounts for some late day volatility that we're seeing in MBS, and to a greater extent, in Treasuries.
Fannie 3.0's are down 4-5 ticks from their highs of the day, in line with the a morning pivot point shared with Friday's "decent volume" lows (that is to say, the lowest prices seen Friday that still occurred when volume was respectable, before tapering off into the weekend).
If things slide any further, we're at some small risk of negative reprices from the "early crowd" lenders, but would note that rate sheets were fairly conservative already today, especially with respect to MBS movement. We can HOPE that this would provide some insulation against an afternoon sell-off, but can't guarantee that for all lenders.
In the broader and least panicky sense, we wouldn't read too much significance into revisiting the morning lows around 103-03, and many lenders may not even reprice for the worse even at those levels. For now, slight risk, and increasingly so as we flirt with negative territory.
MBS, Treasuries Approach Friday Morning Levels As Stocks Slide
It continues to be the case that very little is happening this morning with the exception of the just-completed Fed "Twist" buying just at 11am. MBS and Treasuries have rallied, though we'd note that volume is low enough that some of the improvement could be due to the Fed buying operation (i.e. dealers letting prices drift higher into guaranteed Fed buying).
Even so, the improved levels have held up in the first few minutes following the 'twisty' operation, ostensibly helped along by a stock market that continues to sell off from highs just before the 10am hour. S&P futures are down roughly 7 points since then.
10yr yields are 2.5bps better since last check, currently 1.6335 and Fannie 3.0 MBS are up 4 ticks at 103-08/103-09 which has been a resistance level for the past hour. It's early in the day still, but positive reprices seem increasingly likely if we break higher from here (which looks like it might soon be the case).
Live Chat Featured Comments
Jason Zimmer : "update the old"
Bromi Krock : "did they update the old one or is their a new link JZ?"
Jason Zimmer : "has anyone else seen the new fannie look up tool? it now has the fannie acquistion date"
Steve Chizmadia : "Great reserves, 800 ficos, low ratios with the bonus income. I think I'll make it happen. Bonuses are very consistent year over year and have been going up, but he has not received his large bonus that comes after fiscal year ends in September"
Michael Gannon : "I just closed 3 loans that were all Red Bull employees with bonus. Red Bull does not discuss any of that.....closed all 3 and did 2 of them as purchases a few years ago. should be fine "
MC : "depends on the lender and/or the U/W and their overall comfort level on the deal. "
Gus Floropoulos : "I think so, as long as its not declining"
Steve Chizmadia : "If a employer has a company policy that refrains from them commenting on the liklihood of bonus income and it's continuance, but the employee can go back 4 years and demonstrate he has received bonuses in each possible bonus period that are consistent, can I use the bonus income? "
Rob Clark : "REPRICE: 1:02 PM - Provident Funding Better"
Jason Adams : "I did 2 this morning and it didnt ask until just now.. strange "
Ted Rood : "That's new since last week."
Jason Adams : "Fannie Mae updated the loan look up tool... I must have missed the party. now you need last 4 SS like Freddie... "
Gus Floropoulos : "you didnt hear? Greece's gdp was better than expected...instead of -7%, it was -6%!!!all is fixed"
Brett Boyke : "gonna need a hope inspiring headline pretty quick, the troops are getting restless"
Eric Franson : "REPRICE: 12:40 PM - Wells Fargo Better"
Jim Begley : "BS: Not yet. We met with our regional manager last week and got a preliminary number of 2.125 for New Mexico."
Bryce Schetselaar : "has Suntrust announced the state comp levels yet?"
Brett Boyke : "New lawsuit against bailout decision date is questioned according to German press Handlesblatt
All of Europe is waiting for the decision of the Federal Constitutional Court on the bailout. Previously unable to start this. But now a new lawsuit could delay the decision of the Constitutional Court.
At the Constitutional Court in Karlsruhe a further appeal against the euro rescue package has been received, which could upset the timetable for the euro rescue.
The decision of the Federal Constitut"
Matthew Graham : "(ZIRP = "zero interest rate policy" btw... and the the "explicitly stated" part refers to 8/8 being the inception of the Fed actually stating a calendar time frame for ZIRP, i.e. "through mid 2013" and more recently "Through late 2014" etc...)"
Matthew Graham : "the discrepancy in volume is much more a factor in Treasuries and broader markets. Relatively lower mortgage rates, and increased origination keeps MBS volume much closer to 8/2011 levels. We saw 1.5 bln of Fannie 3.0 hedging on Friday alone, which is a busy day no matter the context."
Matthew Graham : "recall that 8/2011 was the beginning of the major fall to generational lows for Treasury yields and that 8/8 was the FOMC announcement that contained the introduction to explicitly stated ZIRP time-frames. Naturally, 2011 obliterates 2012 because of those factors"
philip mancuso : "hey mg, do you know what volume looks like 8/2012 v 8/2011 for treasuries/mbs?"
Matthew Graham : "1.59-1.61 zone, but volume's a bit too low to care much."
Scott Valins : " is there a meaningful 10 year number that is worth watching for a potential break lower?"
Andy Pada : "32 bps better"
Brett Boyke : "AP - how much better is a 30 day vs 60 day at the window?"
Andy Pada : "fyi: cash window is about 5 - 7 bps better now."
Victor Burek : "but, by days end after we get reprices better, pricing will be better"
Victor Burek : "the sheets i have seen are the same"
Daniel Kramer : "well the 10 week streak of better pricing on mondau from friday is over"