The week got off to an exceedingly slow start, both in terms of volume and volatility, which put in their tamest performances in several weeks as far as broader bond markets were concerned. As we suggested last week, markets seemed to struggle with reading too positively into the Nonfarm Payrolls numbers (which were only stronger than expected with the consensus set lower to account for Sandy disruptions, which the BLS noted were NOT a factor). If markets should have done a better job pushing back against that phenomenon, we got to see a bit of that determination today, but ultimately, volume was too low to get too excited. In fact, the only directional performance versus Friday was seen in MBS, and by the time we shift our view to January coupons tomorrow morning, it won't look like much of a gain. The overriding theme is: waiting for FOMC Wednesday and any meaningful Cliff headlines.
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 4:05 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
MBS Back To Highs As Treasury Yields And Stocks Come Off Theirs
When the range is this narrow, it doesn't take much to move from the lows to the highs. Such is the fate of Fannie 3.0s, which just edged into their best levels of the session at 105-08 after hitting lows roughly 1 hour earlier.
There's been little by way of market-moving news or events to cause the shift, but it does coincide with a broadly connected "risk-off" bounce shared by stocks and Treasuries. S&P's took two stabs at breaking Friday morning's highs and failed on both accounts. 10yr yields shied away from breaking their Friday highs as well. All in all, we're left with the impression that markets have taken the safe route and decided to stay inside Friday ranges in relatively low volume.
Previously growing reprice risk fades from concern at current levels, and "stability" reprices would be more likely. That said, "no reprices" remain the most likely scenario unless MBS add a few more ticks.
MBS At Weakest Levels After Cliff Comments, Fed Operation
Fannie 3.0s just returned to their weakest levels of the morning in a sort of slow motion sell-off beginning around 11:00am. As can frequently be the case, there was slight pressure on bond markets following the Fed's scheduled "Twist" buying, but Fiscal Cliff Headlines are definitely a factor as well.
No game-changers have been reported, but Bob Corker's call for Republicans to fold on the "top 2% tax" debate was taken as a sign of progress, lifting stocks and hurting bonds. Then roughly 10 minutes ago, a spokesman from the White House said that lines of communication remain open and the President believes a deal can be reached.
As usual when it comes to Cliff headlines, the more pronounced reaction is in equities markets, but we'd note that the overall reaction is almost undetectable. This is as it should be considering that nothing new has really come to the table. Still, there's simply been a small amount of pressure on bond markets that happens to coincide with the aforementioned events.
As for it's implications on reprice risk, outright price levels make that less than likely at the moment, but for a very small subset of lenders, not impossible. 105-03 is essentially the low of the session (one early quote sneaked in at 105-01, but 105-03 is bona fide). As such, and in conjunction with the fact that 105-07 highs were seen between 9-10am, we're right on the cusp of that "eighth of a point" difference from rate sheet time, which is often the threshold between negligible reprice risk and that which bears consideration.
Live Chat Featured Comments
Clayton Sandy : "REPRICE: 3:23 PM - Chase Better"
Rob Clark : "That is their second."
Rob Clark : "REPRICE: 3:21 PM - Provident Funding Better"
Nate Miller : "REPRICE: 2:22 PM - Interbank Better"
BVG : "wow Mike Drews you got me beat ---closing on two from July."
Tom Schwab : "Neverbank"
Brett Boyke : "I submitted a deal to them, they came back 10 weeks later and said we didn't disclose to their protocol"
Mike Drews : "I'm closing my 2nd and last everbank deal thes wednesday--I took the app beginning of May"
Ken Crute : "everbank will take about 4-5 months if its a clean deal and you have all your docs upfront "
Brett Boyke : "Everbank was, but good luck with them"
Jeff Anderson : "Congress has discovered how easy it is to hide this "tax" as a GFee. So rates move an 1/8th to the consumer. They have no idea. Rates are still at lowest levels ever, so not felt. Easier than a gas or other sin tax. Our market needs to let the public know this as I'd think it will get worse."
Oliver S. Orlicki : "LF is awful"
Alan Craft : "LF in Tampa I think"
rford : "anybody know of a whoelsale lender in FL that is doing open access HARP on condos over 105% LTV? "
Rob Clark : "REPRICE: 12:07 PM - Provident Funding Better"
S John Murray : "I have had a couple of w-2 borrower's that claimed sched C expense income that triggered tax returns..I would ask U/W for the 4506 T transcripts that came back..bet your answer is on that as there also could be Sched E expense showing"
Matt Hodges : "uw having a bad day"
Chip Harris : "no, straight W2 income"
Matt Hodges : "income other than wages, chip?"
Chip Harris : "Got an FHA underwriter requiring a new 4506T so that she can verify 3 years of tax returns. Never seen that before. When I asked what the reson was, I got this for an answer: IT'S REQUIRED FOR THE LOAN.
Matthew Graham : "RTRS - HOUSE REPUBLICAN-WHITE HOUSE FISCAL CLIFF TALKS 'ARE TAKING PLACE' - BOEHNER AIDE"
Matthew Graham : "RTRS - HOUSE REPUBLICAN OFFER ON FISCAL CLIFF ISSUED LAST WEEK 'REMAINS THE REPUBLICAN OFFER' - BOEHNER AIDE "
Matthew Graham : "RTRS - U.S. HOUSE SPEAKER BOEHNER WAITING FOR NEW FISCAL CLIFF PROPOSAL FROM OBAMA - BOEHNER AIDE "