MBS Live: MBS Afternoon Market Summary
It may well be the case that a complex, interconnected framework of esoteric data and news pushed bond prices steadily higher in the overnight session, but we'll never know because the Fiscal Cliff dominates the market's thought process.  It's a big issue to be sure, and you can't fault the market for front-running the outcome of the big issue du jour when it thinks it sees a clue, but we seem to have quickly arrived at that unfortunately familiar point (thank you Greece!) of reacting somewhat violently to every potential clue.  As such, little else made rounds this morning by way of overnight trading themes outside an "extension of bond-market-friendly momentum following Senator Reid's comments yesterday."  In the domestic session, the Fiscal Cliff show continued in full force, this time sending bond markets in the other direction despite a strong 5yr Treasury Auction.  For the record, the emotional, over-caffeinated lemming routine is significantly more noticeable in equities markets, but it takes a toll on bond markets nonetheless.  MBS had some ground to give, having risen to their highest levels in more than two weeks this morning, but are headed out the door a few ticks weaker now, with several lenders repricing negatively along the way.
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
105-01 : -0-03
FNMA 3.5
106-17 : -0-02
FNMA 4.0
106-32 : -0-01
FNMA 4.5
107-24 : +0-01
GNMA 3.0
106-16 : -0-05
GNMA 3.5
108-18 : -0-05
GNMA 4.0
109-06 : -0-03
GNMA 4.5
108-25 : -0-01
104-22 : -0-04
106-05 : -0-03
106-14 : -0-01
107-01 : +0-02
Pricing as of 4:06 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.

3:11PM  :  ALERT ISSUED: Ongoing Negative Reprice Risk As MBS Push To New Lows
Late day illiquidity is pushing production MBS prices lower following the 3pm Treasury close and Treasuries themselves are leaking higher in yield as the after hours session kicks in. Negative reprices have already been a sort of constant companion since the early afternoon. This most recent jolt of weakness merely keeps that pressure on. Fannie 3.0s fell to 105-03 briefly and are now at 105-04, 1 tick lower on the day.
2:34PM  :  ECON: Beige Book Shows Fiscal Cliff On The Radar
The Fed's Beige Book typically isn't that interesting, merely serving to recap anecdotes from the Fed's business and industry contacts. Today's really isn't much of an exception and markets aren't doing much with it, but there's perhaps been a bit of a benefit for bond markets and a hit for stocks, though the correlation is microscopic at best.

More interesting than the market's reaction (or lack thereof) is simply the growing body of evidence suggesting that business are concerned about the Fiscal Cliff. While it's somewhat notable that 7 out of 12 regions reported weaker factory activity, 5 of those chalked the weakness up, in part, to the Fiscal Cliff.

As expected, the Book reported some weakness in the New York district due to Hurricane Sandy, but overall, economic activity continued to expand at "a measured pace." Respondents noted that the market for single family homes continued to improve except for the Boston and Philadelphia districts. Keep in mind that the Federal Reserve "districts" aren't limited to the metropolitan area in question. This can account for discrepancies in the apparent health of your local housing market and the Beige Book's anecdotes. The Boston district, for example, is comprised of CT, MA, RI, VT, NH, and ME.
1:56PM  :  Housing Regulator Sees Recovery Taking Root
(Reuters) - The chief U.S. housing regulator on Wednesday expressed optimism that the deep downturn in the nation's property market was finally over, but said the future of the government's role in housing finance needed to be settled for long-term health.

"I am cautiously optimistic that the signs of stability - and in some areas, strength - that have started to emerge in certain sectors of the housing market are signals that it is beginning to recover," Edward DeMarco, acting director of the Federal Housing Finance Agency, told the Exchequer Club.
1:21PM  :  Auction Provides Small Boost For MBS. Too Little Too Late?
The 5yr Treasury Auction came in better-than-expected with a 0.641 stopping yield versus a 0.649 "when-issued" yield at 1pm. (more on Treasury auction terminology). The bid-to-cover, at 2.89, was similarly stronger than the recent average of 2.86.

Bond markets initially rallied after the results but gains were limited. 10yr yields fell less than 2bps and MBS rose a scant 2 ticks before hitting their head on the same levels that provided a floor heading into the auction. For now, the short term resistance is clearly the 105-06 area for Fannie 3.0s. This lines up well with broader bond market currents which have a resistance level of 1.6147 in terms of 10yr yields.

In other words, "too little too late" is indeed the way things are going for now, and that assessment changes when the aforementioned resistance levels are breached. Fannie 3.0s are currently very close though, at 105-05 and 10yr yields are right on the 1.6147 line as well. Still anyone's game.
12:43PM  :  Obama: Let's Get Fiscal Cliff Deal Before Christmas - CNBC
President Barack Obama said Wednesday he hoped to reach a deal on the "Fiscal Cliff" before Christmas but insisted that Congress move now to prevent a middle-class tax increase in January. "Let's approach this with the middle class in mind," he said.

To that end, Obama spoke Wednesday with an invited group of Americans who would see their taxes go up if the White House and congressional Republicans are unable to strike a deal before the end of the year.

"Our ultimate goal is to get an agreement that is fair and balanced," the president said in a nationally televised statement from the White House. "My hope is to get this done before Christmas."

"But the place where we already have, in theory at least, complete agreement right now is on middle-class taxes," Obama said. "If Congress does nothing, every family in America will see their taxes automatically go up at the beginning of next year."
12:34PM  :  ALERT ISSUED: Reprice Risk As MBS Hit New Lows Following Obama Speech
There was a bit of "which way do we go" after Obama's political appeal to middle class Americans to Tweet their Congresspeople about resolving the Fiscal Cliff. But we're now seeing the answer is "lower" for MBS, which have now moved to their session lows, down 1 tick at 105-03. Meanwhile, stocks are at their highs, as are Treasury yields with some additional pressure created by the need to take down the 5yr Note auction at 1pm.

Depending on what time of day a particular lender was out with their first rate sheets, we've now crossed into "negative reprice risk" territory. For some lenders, this may not be a foregone conclusion, but the faster-acting lenders could be close at these levels.
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.

Matt Hodges  :  "good job steve. i've locked 4 pre-RP"
Steve Chizmadia  :  "That Pinnacle reprice makes me smile for the 6 clients I protected in locking this am. Thanks again to MBS live..."
Michael Mitchell  :  "REPRICE: 3:27 PM - Pinnacle Worse"
Eric Leithliter  :  "REPRICE: 2:46 PM - AMX Worse"
Jim Leonard  :  "REPRICE: 2:19 PM - Sierra Pacific Worse"
Jeff Anderson  :  "REPRICE: 2:06 PM - Chase Worse"
Steve Chizmadia  :  "REPRICE: 1:52 PM - Sun West Mortgage Worse"
Steve Chizmadia  :  "Confirmed. About 10 bp in fee worse"
Steve Chizmadia  :  "Sun West currently undergoing a price change as well. TBD on worse or better, but if I were a betting man, I'd guess they will follow suit with IB and Flag. and worsen fee minimally. "
MC  :  "REPRICE: 1:47 PM - Flagstar Worse"
Rob Clark  :  "REPRICE: 1:06 PM - Interbank Worse"

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