On a day where the ECB press conference with Draghi stood out as the most likely market mover, it was instead the triumphant 30yr Treasury auction that did most to motivate movement and inspire volume in bond markets. Things weren't especially slow in the overnight session or in the morning hours either, but directionally, they were sideways and perhaps even a bit conflicted. The auction, then, was a good reminder as to the "justified" nature of current trading levels in Treasuries, and by association, MBS. Fannie 3.0s added a good quarter of a point following the auction, taking them above most of yesterday's trading range and out the door (or close to it) at 105-16.
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 4:04 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
Utterly Triumphant 30yr Auction Sends Bond Markets Soaring
It's downright rare for a 30yr REFUNDING auction to come in at lower-than-expected yields. In fact, 16/17 refundings have been higher than expected. Today's was lower though... Much lower, coming in at 2.82% vs a 1pm "when-issued" yield of 2.855.
The bid-to-cover was also quite strong at 2.77 vs an average of 2.50 for refundings and 2.61 for the last 8 auctions including reopenings. Indirect bidding--a rough proxy for foreign participation--was huge at 45.4% of the issuance vs an average of 32% historically.
The reaction in bond markets has been huge as well, and finally enough to bring 10's into the green on the day at 1.6284. 30yr yields dropped roughly 4bps after the results, and Fannie 3.0s shot up over a quarter of a point instantly, now 12 ticks higher on the day at 105-16.
It's not uncommon for post-auction volatility to go both ways to some extent, but this one likely has some staying power. If MBS hold anywhere close to current levels, it'd be fair to expect some positive reprices, though lenders might be somewhat constrained by the impending settlement for Fannie and Freddie 30's beginning tomorrow.
30yr Auction Preview
A few notes on the 30yr Treasury auction coming up at 1pm...
- 30's have lower Bid-to-Cover ratios (BTCs) on average, compared to shorter duration auctions. And "refunding" auctions tend to have lower BTCs than "reopening" auctions. Today's is a refunding. The last 4 refundings have average 2.50 btc.
- The auction's stopping yields tend to be higher than the 1pm "when-issued" yield, which is 2.855 today. Anything lower than 2.855 is good, higher is bad, but within a certain range of there may have no impact.
Read more about Treasury auction jargon Here
Live Chat Featured Comments
Gus Floropoulos : "REPRICE: 2:44 PM - PHH Better"
Nate Miller : "REPRICE: 2:36 PM - Interbank Better"
Nate Miller : "REPRICE: 2:27 PM - Caliber Funding Better"
Rob Clark : "Second for Provi"
Rob Clark : "REPRICE: 2:04 PM - Provident Funding Better"
BRANDEN REEVES : "REPRICE: 2:04 PM - Chase Better"
Steve Chizmadia : "REPRICE: 1:51 PM - Sun West Mortgage Better"
Steven Stone : "i personally am more cautious and will not be counting it even if they are"
Steven Stone : "they are closed"
Ira Selwin : "are they closed?"
Victor Burek : "despite being closed?"
Victor Burek : "so they are funding loans on monday?"
Steven Stone : "wells says sunday is the holiday not monday"
Daniel Kramer : "if bank isnt open due to a federal holiday, then it doesnt count as a rescession day"
Victor Burek : "just hope others dont think if they have a loan at wells that monday will count toward the 3 day right"
Victor Burek : "i agree, so i dont know how wells thinks they can count it as a recession day"
Derek Nadvornick : "It does not matter. Rescission days go by the days the post office is open and delivering mail because if you postmark a rescission letter on day three you're out."
Victor Burek : "agreed on the holiday part, but if i had a loan at wells with a rate that might expire, i woudl consider monday a recession day"
Ira Selwin : "Four federal legal holidays are identified in 5 U.S.C. 6103(a) by a specific date: New Year’s Day, January 1; Independence Day, July 4; Veteran’s Day, November 11; and Christmas Day, December 25. When one of these holidays falls on a Saturday, July 4 for example, federal offices and other entities may observe the holiday on the preceding Friday, July 3. The observed holiday, July 3, is a business day for purposes of rescission or the delivery of disclosures for certain high-cost mortgages covere"
Chip Harris : "Can't count Monday since it's the "observed" holiday"
Victor Burek : "from plaza, It is important to remember that Monday, November 12, 2012, is a federal holiday and cannot be included in the rescission period for rescindable loans."
Derek Nadvornick : "I thought any day without mail delivery was not a rescission day, since the rescission goes by postmark date?"
Victor Burek : "other lenders are not counting it as a recession day"
Ira Selwin : "Only because I researched it after seeing the WF memo. I never knew that before "
Ira Selwin : "Veterans day is one of four federal holidays that have a "static" date. By rule, the observed holiday is still counted as a rescission day"
Kent Mikkola #353976 : "REPRICE: 1:17 PM - Sierra Pacific Better"