MBS Live: MBS Afternoon Market Summary
With the arrival of slightly more important pieces of data and events, volume picked up slightly again today, though the overall calm theme of the week persisted. Both MBS and Treasuries began the day in better territory thanks to Asian and European trading, but only MBS were able to maintain the overnight gains throughout the session. An ugly 10yr TIPS auction took its toll on the Treasury complex with 1pm clearly standing out as the turning point of the day for 10yr yields. 10's are heading toward 5pm in roughly the same shape as yesterday. MBS MADE the "same shape" as yesterday in terms of charts, but simply at another quarter of a point higher in price. Most lenders put out their best rate sheets ever.
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.
1:11PM :
ALERT ISSUED:
Record Negative Yield 10yr TIPS Means Pressure On MBS, But Not Panic
Normally not a major market mover, the 10yr TIPS auction came in at record negative yields just after 1pm. This has been good for the biggest pop of volume of the day for 10's and a good bit of pressure translating to MBS.
So far this has caused a small, but noticeable spike in MBS prices, but no massive break below previous support levels . Much like yesterday, today's prices continue to trade in a range marked on the low end by the previous day's highs (pivot point between the sessions). That said, we just bounced at right 104-17. This was the same support level mentioned this morning as a good line in the sand for increasing reprice risk.
We'd continue watching it for support and continue to not expect many (if any) lenders to reprice while we remain above it.
So far this has caused a small, but noticeable spike in MBS prices, but no massive break below previous support levels . Much like yesterday, today's prices continue to trade in a range marked on the low end by the previous day's highs (pivot point between the sessions). That said, we just bounced at right 104-17. This was the same support level mentioned this morning as a good line in the sand for increasing reprice risk.
We'd continue watching it for support and continue to not expect many (if any) lenders to reprice while we remain above it.
12:07PM :
ECON: Household Debt Rises At Fastest Rate Since Q1 2008
Household debt rose at an annual rate of 1¼ percent
in the second quarter, the largest increase since the
first quarter of 2008. Nonetheless, household debt
has changed little, on net, since the third quarter of
last year.
Consumer credit rose at an annual rate of 6¼ percent in the second quarter, the seventh consecutive quarterly increase. Home mortgage debt declined a bit more than 2 percent in the second quarter, continuing the downtrend that commenced in early 2008.
Household net worth—the difference between the value of households’ assets and liabilities—was $62.7 trillion at the end of the second quarter of 2012, about $300 billion less than at the end of the first quarter. In the second quarter, the value of corporate equities and mutual funds owned by households declined close to $600 billion, more than offsetting a $355 billion increase in the value of real estate owned by households.
Consumer credit rose at an annual rate of 6¼ percent in the second quarter, the seventh consecutive quarterly increase. Home mortgage debt declined a bit more than 2 percent in the second quarter, continuing the downtrend that commenced in early 2008.
Household net worth—the difference between the value of households’ assets and liabilities—was $62.7 trillion at the end of the second quarter of 2012, about $300 billion less than at the end of the first quarter. In the second quarter, the value of corporate equities and mutual funds owned by households declined close to $600 billion, more than offsetting a $355 billion increase in the value of real estate owned by households.
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.
Dennis Lykins : "85% purchase, 95% govt last 15 yrs."
John Toepfer : "I'd say started in 2009 and has only increased along w/ referrals so the serial refi pool just keeps getting bigger. It will end eventually!"
Brayden Alexander : "Me too, I just did Snap, Crackle and Pop for the 3rd time in 2 years. #cereal ♫♪ ♫♪♫"
John Toepfer : "of my refis about 70% are serial, seems like every 8-9 months they are shaving /.5 off. "
Andrew Horowitz : "it'll bounce back"
Matthew Graham : "RTRS - LATEST U.S. 10-YEAR TIPS NOTES SOLD AT RECORD NEGATIVE YIELD "
Matthew Graham : "TIPS Auction causing a shake up"
Grant R. Menard : "Or show them that upfront Tom. Always a great selling point. "
Thomas Nelson : "When you drop them for 23 years to 20 years or 17-15, 30-25....whatever. Call them back after they make their first payment and tell them to look at their statement to see how much went to principal vs their last payment they made with their old loan (email that statement to them). It's and eye opener for them. "
Joel Marks : "TN is right about referrals, too. It's an affluent, connected group that loves telling their friends about their low rate and the guy (or gal) who is helping them do it. At least this is what I find out here in the Bay Area."
Thomas Nelson : "One guy with a 400k, 4.5% loan who didn't refi in the last year was so happy to get 3% with no costs in March for a 15 year.....But, he could have refinanced twice during that time with zero costs at .5% less in rate each time. He paid 4-5k in interest extra waiting for his desired rate."
Thomas Nelson : "Probably half MG....those people are the best referral sources as well, as they get the value of free money."
Ted Rood : "I wouldn't say I'm doing nearly as many as I used to. Working more now on the folks who DIDN'T refi over the past couple of years, the ones who are considering the possibility of potentially pondering whether it would be good to drop their 5.5% rate....."
Thomas Nelson : "MG, Yes of course, why would you not? Especially if your clientel has listened and refinanced with zero closing costs."
Joel Marks : "Once the EPO is coming up, I'm on it. I have many people with $500k - $600k loans that will refi to knock a quarter off at no cost (need .375% better on a 15 year to make it worthwhile).. They're happy and I'm happy. Why not?"
Brent Borcherding : "I have 1 serial refier and he is a disabled vet that drops with every .5% drop in rate he can get no cost. "
Matthew Graham : "interested in the demographic here... I get the impression that a lot of us are still recycling eager serial refi folks."
Ted Rood : "MG, valid point about prepay expectations, but from my view it's getting harder by the day to do serial refinances. Can't with FHA without incurring large UPMIP, can't with conforming unless 20%+ equity, can't with VA in most cases unless same servicer or doing appraisal to document value. Sure, Joe Borrower with 30% equity and a 780 score can do conventional refi every 6 months if conditions warrant, but those borrowers are not the majority of homeowners I see."
Ryan Kelly : "I think we will se an increase in loan assumptions, and situations where childern take over the payments on parents home with-out transfer of title "
Matthew Graham : "the 3.375% 30yr note will be a commodity that enters into the consideration of whether or not to move-up to a much greater extent, as you suggest."
Matthew Graham : "I think I pretty much agree with that, but would characterize it as "creating uncertainty" rather than distorting. In other words, there's a lot of uncertainty as to how prepay speeds will evolve, but certainly, they're going to get mega long if rates rise and home values rise."
Brent Borcherding : "At some point, though, don't rates at these levels have to drastically distort the rate, moving forward, at which pay offs will happen. Maybe not if rates stay at or near these levels for 5 -8 years, but if they do increase, say, to 5% or more in the coming 3-5 years... moving up will get much more expensive and people may not do so."
Matthew Graham : "In other words, if mortgages don't last long enough (before the underlying property is refi'd, foreclosed, sold, etc..), then investors will pay less and less."
Alan Craft : "They lose $?"
Matthew Graham : "Let's consider what the PRICE of an MBS coupon implies at it's simplest level: 100-00 = PAR = whoever buys it at this price is buying it at the actual amount of principle financed. Notice the lack of anything remotely close to PAR, let alone below. That means whoever buys an MBS pool is only doing so based on the assumption that they will be able to earn a certain amount of interest for long enough that it makes sense to pay the premium. What happens if rates drop quickly enough that recentl"
Matthew Graham : "and let's not forget the invisible 800lb gorilla of lock fallout/pipeline cannibalization and EPOs--all the prepay speed considerations that keep lenders from wanting to lower rates too quickly regardless of capacity."
David Z. : "Might not be Better, there are still capacity issues"
John Toepfer : "agreed, same thing happened last time gfee increased. rates didn't come down for awhile"
Andrew Horowitz : "1/4 better in price or rate? no way g-fee bumped rate that much"
Jeff Anderson : "It was, but today is probably the best rate sheets I've seen, so it is working a bit. Would be 1/4 better w/out the Gfee, though."
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