MBS Live: MBS Afternoon Market Summary
Bond markets offered up a decent head fake this morning as we were stronger out of the gate for once!  But that changed abruptly heading into the 11am hour due to a number of potential factors.  These are literally so many and so diverse that commenting on any of them as materially more important than another would amount to nothing more than guessing.  If you were counting on us to guess, then we'd say that markets have been forced to pay a disproportionate amount of attention to Google today, which accidentally released earnings early, resulting in shares ultimately being halted after a massive sell-off.  Beyond that, a generally positive tone of EU headlines pervaded and domestic data was largely ignored.  The market looks completely different at 3pm vs 11am with the bigger picture looking more like a continuation of a selling trend as opposed to the first hope of a bounce back. That said, the day-over-day changes are less than an eighth of a point in MBS and not even a 0.01% higher in 10yr Treasuries--fairly minimal changes considering how the day felt.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
104-08 : -0-03
FNMA 3.5
106-00 : -0-02
FNMA 4.0
106-28 : -0-01
FNMA 4.5
107-26 : +0-00
GNMA 3.0
105-22 : -0-05
GNMA 3.5
108-04 : -0-05
GNMA 4.0
109-01 : -0-03
GNMA 4.5
108-22 : -0-02
104-02 : -0-03
105-25 : +0-00
106-15 : -0-01
107-04 : +0-01
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 this afternoon.

3:01PM  :  ALERT ISSUED: MBS Ratcheting Continues, As Does Negative Reprice Risk
There's little to say about this afternoon's MBS losses. They fit the same pattern that we've seen on several recent afternoon's where MBS have been able to keep better pace during the morning and early afternoon hours, but lose steam in the last 2-3 hours of the day as liquidity takes its toll.

Fannie 3.0s are well below the 104-09 level now, currently 104-05, down 5 ticks on the day. Reprices for the worse have been rolling in since the last reprice alert, and the pace may pick up a bit with the most recent wave of weakness.
1:08PM  :  ALERT ISSUED: Early Google Earnings Hit Stocks, Help Bonds Dig In. Need Bigger Heels
Although there's no major about-face underway, bond markets have at least been able to dig in their other heel in an attempt to hold ground around unchanged levels after Google released earnings at an earlier-than-expected 12:30pm. S&Ps shed a quick 4 points and 10yr yields rallied a quick bp or two. Fannie 3.0s moved off 104-09 lows to 104-12.

The 30yr TIPS auction followed just moments ago, neither helping or hurting the situation, but we would note that bond markets are looking much more stuck in the mud than they are eager to snap back to better levels. Thanks go to Google earnings for helping us dig in our heels, but it looks like we'll need bigger heels to get out of the mud.
11:45AM  :  ALERT ISSUED: MBS Fight To Stay Green After Twist Buying; EU Developments
MBS and broader domestic bond markets currently have their backs against the wall after several factors combined to offer a quick jolt to the weakest levels of the day.

For those interested in ascribing causality, we'd caution against trying to pin any spikes on a singular event and thus would offer the following considerations that were in play heading into the 11am hour.
  • Fed's Twist buying details showed a little extra supply offered by dealers for a 25-30yr takedown. There may have been some longer dated Treasuries left on the shelves afterward.
  • The technicals weren't looking so good even before the brief selling spree with MBS having a hard time with the 104-18 pivot and 10's having a hard time crossing the mid 1.78s.
  • Equities bounced fairly well off their lows of the day around 10:30 and bond markets have been increasingly willing to follow a stock rally. But that could be more a function of the following bullet:
  • It's been a good afternoon in Europe for the peripheral debt situation. Spreads in Greece and Spain continue to grind tighter to German Bunds. When that happens, it's bad for risk-free and low-risk bond markets like Treasuries and MBS.
  • While the spread tightening in the periphery is a general phenomenon in its own right, specifically, we had the closing of an ongoing auction of inflation-linked bonds in Italy that grew to an impressive size of €17 bln. We're not sure how much markets care about this, but it's results did coincide with the swings in domestic bond markets
Whatever the case may be, MBS are now languishing at their lows of the day which are essentially the lows from yesterday, around that 104-09 to 104-12 range. The latter is a support level that we'd like to hold, but that looks to be in question at the moment. All of the above has already been sufficient for one negative reprice and more are likely on the way at these levels. A definitive break below 104-09 makes that even more likely.
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.

Lea Shaw  :  "JY- correct"
Jason York  :  "for someone vacating their principle residence without 30% equity, and trying to buy a new primary, we can't use rental income, and they have to have 6 months reserves for old primary and new primary, correct?"
Rob Clark  :  "REPRICE: 3:40 PM - Stearns Lending Worse"
Kent  :  "REPRICE: 3:33 PM - Wells Fargo Worse"
Steve Chizmadia  :  "Exercise this philosophy in a range bound market and no real need to be nervous if you properly communicate with your clients http://www.mortgagenewsdaily.com/mortgage_rates/blog/49123.aspx"
Ira Selwin  :  "REPRICE: 3:16 PM - Chase Worse"
Jeff Statz  :  "It shouldn't be an issue. The main issues for me arise out of LP n/o/o's. I'd just run the scenario by my UW manager if it makes sense and is all right in DU. "
Mike Drews  :  "what about on a no/o 2 unit--DURP, but you'll need an appraisal."
Scott Valins  :  "REPRICE: 12:35 PM - Cole Taylor Worse"
Jeff Statz  :  "only at/below 125 ltv if you're thinking ltv overlays"
Mike Drews  :  "jeff..can you do harp w/o overlays over there?"
William Hansen  :  "REPRICE: 12:30 PM - Icon Wholesale Worse"
Tom Schwab  :  "REPRICE: 12:29 PM - Flagstar Worse"
Scott Valins  :  "now lets bounce off 1.82"
Scott Valins  :  "nice alert MG. helpful"
Matthew Graham  :  "
MBS Live Alert Issued 11:45 AM
MBS Fight To Stay Green After Twist Buying; EU Developments
Read The Full Alert "

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