It was a choppy day for mortgages as slightly lower-than-average volume in MBS and much-lower-than average volume in longer-dated Treasuries exacerbated a "risk-on" sell-off. Markets stayed relatively subdued yesterday and bond markets managed to hold onto a range from late last week. In part, this was due to ongoing violence in the Middle East as well as some level of uncertainty regarding the current round of Greek bailout condition can-kicking. Today brought headlines of a potential ceasefire in the Middle East as well as progress being made on Greece (proverbial "can" was well-kicked!), and both of these developments weighed on bond markets as morning data was generally disregarded. There was a glimmer of hope just after 1pm when Bernanke noted that the Fed "doesn't have the tools to offset the harm of going off the Fiscal Cliff," but the big bounce on that news was seen chiefly in stocks while bond markets merely paused the selling spree.
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 4:07 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
One More Selling Spree? Reprice Risk Increases Yet Again
MBS are back at the lows of the day and 10yr yields are at their highest levels in more than a week as stocks continue to bounce back from 1:30pm lows. Fannie 3.0s are currently 6 ticks lower than rate sheet time, meaning that if you haven't seen a negative reprice today, they remain possible at these levels.
Stocks Slide, Bond Markets Dig Heels In, Risks Moderating
We're not keen to dole out specific amounts of culpability to headlines and events, but would note that "Risk-On" has generally abated since noon. What in the world does that mean?
Simply put, stocks and bond yields had been moving up, together, while MBS prices were generally under pressure. Everything topped out at noon and arguments could be made for several factors being bigger ingredients than others in the overall turnaround.
For now, however, it's being accelerated by a full-scale sell-off in equities markets. S&P futures shed 7 points in the blink of an eye (a 5-minute blink). While that move lines up best with Bernanke saying the Fed "doesn't have the dools to offset the full harm of the Fiscal Cliff," what's important is that MBS are back up within 3 ticks of breaking even with Fannie 3.0s at 104-28.
For many lenders, this greatly diminishes risks of negative reprices. We may not be out of the woods for the day as far as volatility is concerned, but for now, things have stabilized somewhat.
Increased Negative Reprice Risk As Headlines Take Toll
Risk markets continue to rally on news reports suggesting a potential ceasefire is in the works in Gaza. Although a Hamas official was out earlier saying that an Egyptian-brokered ceasefire would go into effect at 2200 GMT, CNN reports suggest that Israel has denied the ceasefire is a done deal.
Elsewhere, Greece is closer to getting its next installment of bailout cash as a Eurozone Finance Minister says they are close to approving the political terms necessary for their final approval.
Fannie 3.0s are down 5 ticks on the day now to 104-26 while 10yr yields and stock prices surge. In and of themselves, MBS prices haven't lost sufficient ground since the last alert to warrant additional reprices, but the acceleration of the broader "risk-on" movements increases the chances for negative reprices for now. This may change quickly if prices bounce back quickly.
Live Chat Featured Comments
Ira Selwin : "REPRICE: 3:53 PM - Franklin American Worse"
Eric Franson : "REPRICE: 3:38 PM - Wells Fargo Worse"
Jason York : "REPRICE: 3:36 PM - Fifth Third Mortgage Worse"
Daniel Cruz : "REPRICE: 3:26 PM - Icon Wholesale Worse"
Michael Mitchell : "REPRICE: 3:09 PM - Suntrust Worse"
Matthew Graham : "RTRS- BERNANKE: FED DOES NOT HAVE THE TOOLS TO OFFSET FULL HARM OF GOING OFF THE FISCAL CLIFF"
Matthew Graham : "Bernanke now echoing previous statements from other Fed govs on "interest on excess reserves" being more appropriately used as a policy tightening tool vs stimulus tool"
Ira Selwin : "This all still goes along with "being clear", right?"
Matthew Graham : "RTRS - BERNANKE: CAN ENTER 'POSITIVE VIRTUOUS CIRCLE' IF HOUSING KEEPS MOVING IN RIGHT DIRECTION"
Matthew Graham : "RTRS- U.S. FED'S BERNANKE SAYS USING CALENDAR DATE-BASED POLICY HAS PROBLEMS "
Matthew Graham : "RTRS- BERNANKE: LOOKING VERY CAREFULLY AT POLICY 'THRESHOLDS'; PLAN HAS ADVANTAGES "
Nate Miller : "REPRICE: 12:36 PM - Interbank Worse"
Rob Clark : "REPRICE: 12:19 PM - Provident Funding Better"
Matthew Graham : "RTRS- BERNANKE: "COOPERATION AND CREATIVITY" TO SOLVE FISCAL CLIFF COULD HELP MAKE 2013 "A VERY GOOD ONE FOR THE AMERICAN ECONOMY" "
Scott Rieke : "I guess that's as close as Big Ben can to basically punting the issue back to congress. It's not economic, it's fiscal"
Matthew Graham : "RTRS- BERNANKE SAYS FAILURE TO LIFT US DEBT CEILING IN EARLY 2013 COULD CAUSE EVEN MORE HARM THAN 2011 DEBT STAND-OFF "
Matthew Graham : "RTRS- BERNANKE SAYS FISCAL CLIFF POSES SUBSTANTIAL THREAT TO RECOVERY, COULD TOPPLE U.S. BACK INTO RECESSION "
Matthew Graham : ""24 hours of calm" before Israel agrees to cease-fire - CNN"
Ira Selwin : "7:01 P.M. Israeli official to CNN: Truce deal with Gaza militants not yet finalized, 'ball still in play' "
Andrew Horowitz : "Israel denies cease fire on CNN"
Matthew Graham : "RTRS- FRENCH FINMIN MOSCOVICI SAYS POLITICAL AGREEMENT ON GREECE IS WITHIN REACH "
Matthew Graham : "RTRS - ISRAEL AND GAZA MILITANTS AGREE TO EGYPTIAN-BROKERED CEASEFIRE - HAMAS OFFICIAL AYMAN TAHA"