There was very little out today by way of market moving data, at least not the kind that elicits immediate reaction in financial markets. Instead (and we can do little more than guess here), we saw a broad-based shift into a more defensive stance as Fiscal Cliff negotiations ostensibly evolved. Combine this quasi-optimism that a 2012 Cliff deal is possible with the fact that this is the last full trading week of the year, there are Treasury auctions to take down, not to mention enigmatic year-end tradeflow considerations, and there's probably a compelling enough argument to be defensive out of the gate this week. Low-ish afternoon volumes helped the slopes stay extra slippery for bond markets which saw 10yr yields break their 200-day moving average and move up over 1.77. While past precedent is certainly no guarantee of the future, it's worth noting that the last 3 times 10's have broken over the 1.75 technical level, they haven't moved back below 1.75 without first hitting 1.85. MBS didn't lose ground nearly as fast as Treasuries, but the roughly quarter-point losses were sufficient for reprices to start rolling in by the end of the day.
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
Sharpest Losses Of The Day. Reprices Most Likely
MBS and Treasuries are doing the "sell-off thing" once more, with feeling. This time, MBS have slumped at their quickest pace of the day, making negative reprices as likely as they've been all day. Nothing new here, just adding emphasis to preexisting risks.
Fannie 3.0s down 9 ticks on the day at 104-13, but made it as low as 104-12. 10yr yields have jumped up to 1.7717, and it's worth noting that the last few times they've broken above 1.75 haven't been gentle rides higher, with all three hitting at least 1.85 before closing under 1.75 again.
MBS Tick Down To Lows Of The Day Again
The losses over the past few minutes in MBS have coincided with a break of the 200-day moving average in 10yr Treasuries. This isn't to suggest any sort of cause and effect between the two, but simply to characterize the general tenor of bond markets as shifting toward "DEFENSE" on the approach to the rest of the week. There's auction supply ahead, likely year-end buying to position for, and the specter of a Fiscal Cliff deal that seems to have garnered some anecdotal support today and over the weekend.
Take your pick of those potential factors, but the bottom line is that the negative movement is GENERAL in nature and isn't arriving in big gluts of volume and volatility. Whatever the case, we're now looking at a decided down-trend on the day as opposed to a sideways "ground-holding" that was simply leaking a little weaker in the afternoon. Negative reprice risk probably ebbed a bit after Fannie 3.0's last bounce off 104-16 and probably picks up a bit now with the break to 104-14 moments ago (but for the record, we're back to 104-16 already).
MBS Hit Lows, But Negative Reprice Risk Remains Uncertain
MBS are finally starting to play Treasuries' game... The latter has been taking a beating all session, pushing into the highest yields since early November, while MBS had been able to hold mostly sideways until the the past hour. Even then, MBS were only 1/32nd lower than their previous support levels until the past few minutes.
The earlier, more moderate weakness was enough to elicit one reprice, but these additional few ticks may be enough to get more lenders on board the negative reprice wagon unless we bounce back resoundingly from here. Before you rush to the lock button, there's actually some chance that such a bounce back materializes if benchmark Treasuries put their foot down here.
Fannie 3.0s are 2 ticks off their lows of the day, seen mere minutes ago. We'd be watching prices very carefully at the moment as a move back to or below those lows would validate the current risks whereas holding 104-18 or better would continue to keep all but the most sensitive lenders at bay.
Treasuries Say "Sell," MBS A Bit Stubborn, But May Be Listening
Selling pressure for MBS has been mounting as 10yr yields break over 1.74 and equities continue to rally. Fannie 3.0s are back in line with their lowest levels of the day at 104-19, and while we'd emphasize that this isn't enough movement for negative reprice risk in and of itself, things have been trending in a less friendly direction, especially in broader bond markets.
MBS have held up fantastically well to that selling pressure so far, but that's generally the sort of thing that only lasts so long before they're eventually forced into some level of capitulation. This is your early warning that could happen and a reminder that some lenders act on such things sooner than others--essentially making reprice decisions based on alarming trends rather than a sufficient justification in actual price levels.
If all this "risk-on" momentum were to bounce heartily back in the other direction right now, we may well see no reprices, but at the moment, risks are edging slightly higher for negative reprices, though they'd be more developed under 104-18.
Live Chat Featured Comments
Justin Dudek : "sounds like MBS has a case of the Mondays..."
Matthew Graham : "RTRS- US SENATE DEMOCRATIC LEADER SAYS IT APPEARS LAWMAKERS WILL RETURN DAY AFTER CHRISTMAS TO COMPLETE FISCAL CLIFF WORK "
Rob Clark : "REPRICE: 1:38 PM - Provident Funding Worse"
Matthew Graham : "In other news, 10yr yields just hit their highest levels since 11/6. The absence of more sincere MBS capitulation is starting to get eerie "
Dirk Postupack : "Chip.... in Pa. if the judgement is over 5 years old and hasn't been updated, then it becomes a non-collectable judgment. Ck w/ the county and see if that applies in your state."
Curt Sandfort : "ask the original company to sign a satisfaction and see what happens"
Chip Harris : "anyone have any suggestions on tracking down a payoff on a judgment? It's showing on credit, but company that filed it sold to another company. That company sold to another company and they are sayign they don;t have any information on it since it was over 5 years ago. She will pay it, but she can;t find out who to pay. Checked with the county and there is no assignment of judgment. Still filed under the original collection company."
Isaac Kuznits : "Hey Ted, I locked my refinance rate right before NFP earlier this month based on your quote in one of the daily recaps. THANK YOU!!!!"
Jeff Anderson : "That's what we are with them, Hodgey."
Matt Hodges : "anyone confirm - Wells Fargo now 6 months on EPO?"
Matthew Graham : "uptick in volume and yields following Fed Twist buying. This may work itself out or may be the first step in a more negative journey. "