Today saw the familiar pattern of "post-POMO volatility," referring to the Fed's Permanent Open Market Operations, which are the scheduled 45 minute blocks in which purchases are made under operation Twist. As we noted yesterday, these are something of a focal point for the Treasury complex on any given day, and especially so when other guidance is in light supply. Today's Jobless Claims numbers certainly weren't a concern for markets and Fiscal Cliff headlines didn't cause much of a stir either. This, combined with the fact that today hosted a somewhat uncommon doubleheader of Fed buying, left plenty of room for the post-POMO volatility. Like clockwork, Treasuries put in their best levels of the day at 2pm and simply melted after that. MBS were already underperforming Treasuries by that time and gave up even more ground between 2 and 3pm, finally stabilizing about an eighth of a point under yesterday's closing levels. NOT a very big movement day over day, but FELT like a decent amount of intraday drama. Widespread lender reprices agree. NFP Tomorrow morning at 8:30am.
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 4:03 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
Trying To Dig In At Lows, But Negative Reprices Remain Probable
If you've yet to see a negative reprice, chances are fair-to-good that you will shortly. Fannie 3.0s ratcheted down several more ticks since the initial post-2pm sell-off and are now down 5 ticks on the day at 105-07. A decent amount of supportive buying has come in around these levels and it looks to be the first good opportunity to dig our heels in.
That said, even if we held that support, it's still 6-8 ticks weaker than prevailing levels during rate sheet time.
Fed MBS Purchases Show Shift Toward 3.5 Coupons In Latest Report
The Federal Reserve Bank of New York released it's weekly tally of MBS purchase activity for November 29th through December 5th. Before today, the 4 week average in Fannie and Freddie 3.5% 30yr Fixed coupons had been $2.475 billion per week, while 3.0 coupons rang in at $7.75 Bln.
In the current report, 3.0s were relatively in line with averages, coming in at $7.5 bln while 3.5's were sharply higher at $4.05 bln. On a bright note, Fannie 2.5's saw a record $0.5 bln vs a recent average of $0.03 bln.
Selling Trend Crosses The Line. Negative Reprice Risk Increasing
Fannie 3.0s crossed the technical support level at 105-11 and have since moved down to 105-09, which for some lenders, may be enough for negative reprices.
Some Post-POMO Weakness, But Range Holding For Now
Like yesterday, Treasuries hit their best levels of the day just after the completion of the Fed's Twist buying operation at 11:00am. But unlike yesterday, there isn't a debt-ceiling tape-bomb circulating to incite a chaotic "risk-on" rally for stocks and to create additional selling pressure for bonds. There's still some selling pressure, but not nearly as developed as yesterday's version.
MBS, for their part, are looking a bit detached from the goings-on in related markets. Earlier this morning, we noted resistance centered on 105-15 and support at 105-11. Since then, the resistance proved to be relatively firm with no breaks over 105-15, but the post-11am weakness has also met good support at the 105-11 level.
In that regard, not much has changed from the morning's assessment of 105-11 as a good "heads-up" level that, if crossed, would be the first warning that risk is increasing, though not an outright "trigger" for negative reprice risk.
Live Chat Featured Comments
Michael Mitchell : "REPRICE: 4:05 PM - Kinecta Worse"
Andrew Peterson : "REPRICE: 3:52 PM - Interbank Worse"
Steve Chizmadia : "REPRICE: 3:47 PM - Pinnacle Worse"
Eric Franson : "REPRICE: 3:42 PM - Wells Fargo Worse"
Jason York : "REPRICE: 3:41 PM - Fifth Third Mortgage Worse"
Jay Waters : "REPRICE: 3:39 PM - Franklin American Worse"
Clayton Sandy : "REPRICE: 3:38 PM - Stearns Lending Worse"
MC : "REPRICE: 3:25 PM - Flagstar Worse"
Adam Shelton : "REPRICE: 2:49 PM - 360 Mortgage Worse"
Matthew Graham : "2x Treasury buying operations today, plus less liquid afternoon hours, unconfirmed hunches re: origination picking up, and perhaps some reaction to Fed buying details. MBS did seem to drop off a bit more than they otherwise might have right after 2pm but the bounce in Treasuries was also substantial relative to the day's range."
Paul L. Martin : "MG- thoughts on divergence in MBS and treasuries?"
Lion : "Just locked 9 loans. TY MG & MBS Live for closing out 2012 on a high note :-)"
Matthew Graham : "rather, "2pm marked the end of another round of twist buying" would be a clearer way to say it. Seeing some post-twist-buying volatility in Treasuries and MBS, but I'm not sure if that's the only issue for MBS. I wouldn't be surprised to learn that originations have picked up either, but haven't heard/seen any tallies yet. "
Matthew Graham : "Post twist buying again now. Not sure that's the only issue in play, but definitely one factor"
Matt Hodges : "positioning ahead of NFP, MG?"
Rob Clark : "Clayton had one killed 2 months ago for the same reason"
Matthew Graham : "RTRS - U.S. SENATE REPUBLICAN LEADER BLOCKS SIMPLE MAJORITY VOTE ON GIVING OBAMA POWER TO RAISE U.S. DEBT LIMIT "
Clayton Sandy : "Anyone ever have an issue with a Condo HOA not budgeting 10% for reserves? Have one right now that has about a 8% for this year. U/W telling me it doesn't meet Fannie Mae guidelines."
Jeff Anderson : "Just give him power to do everything. Checks and balances is overrated, anyways."
Matthew Graham : "RTRS- REGARDLESS OF OUTCOME OF SENATE DEBT CEILING VOTE, REPUBLICAN HOUSE LIKELY TO REJECT "
Matthew Graham : "RTRS - U.S. SENATE WILL VOTE ON WHETHER TO GIVE OBAMA POWER TO RAISE FEDERAL DEBT CEILING "