What played out over the past two days has been almost exclusively a bond market phenomenon. Yesterday's FOMC Minute shake up had nothing to do with an accelerated time horizon for discontinuing easing efforts! It simply marked a departure from previously assumed certainty that characterized the collective "voice" of the FOMC governors and voters. Assumptions about the ideological unity of the Fed have simply been repriced and we're still in the process of determining the lasting effects. Bottom line, the core issue is the Fed's BOND MARKET purchases as they relate to the guaranteed cash flows assumed to be present on a set schedule. If we were dealing with the broader notion of QE ending sooner, we would have seen a grumpier stock market yesterday. It's not that the acceleration of QE's completion isn't a factor at all, but not the core issue.
In another testament to that core issue, bond markets were already in the process of improving from ugly overnight levels by the time NFP rolled around, with the data itself merely serving as a volatility-inducing speedbump in the path of a slow grind to better levels. In other words, bond markets were still trying to calm down after yesterday's news that time frame and continuation of their monthly checks from the metaphorical "rich uncle" may be harder to accurately predict than they previously were. Stock markets were up big, and by the end of the day, bond markets were in the green as well, without a hint of "risk-on vs risk-off" stock lever trading.
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 4:20 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
Positive Reprice Potential Continues. MBS, Treasuries at Best Levels
Once again, no material market moving data to report, though the mostly steady grind toward improved levels has continued. 10yr yields are at their lows of the day and MBS are at their highs. Reprices have been sparse, but with Fannie 3.0s up 2 ticks on the day at 104-02, the possibility remains.
Several Positive Reprices As MBS Level Off Near Highs
Little has changed since the morning update as far as new market-moving information coming to light. The 10am data was essentially a wash and markets continued to trade the post NFP range.
Pleasantly enough, that range has held up quite well and MBS, particularly, have favored the upper half of their range after having held their ground mid-morning. Fannie 3.0s are now a mere 1 tick away from breaking even.
While breaking even with yesterday's post-sell-off lows would only mean getting back to 104-00, it's been good enough for several lenders to reprice. More may follow the longer we hold near highs with a similar level of stability.
Live Chat Featured Comments
Bryce Schetselaar : "REPRICE: 1:36 PM - Sun West Mortgage Better"
Matt Sullivan : "REPRICE: 1:29 PM - Fifth Third Mortgage Better"
Eric Franson : "REPRICE: 1:22 PM - Wells Fargo Better"
Matthew Graham : "RTRS- FED'S BULLARD IF ECONOMY PERFORMS WELL IN 2013, FOMC WILL BE IN A POSITION TO THINK ABOUT GOING ON PAUSE WITH ASSET PURCHASE POLICY -CNBC "
Matthew Graham : "with respect to that last chart, it's worth noting that we could fall all the way back to 1.65 and still remain in the longer term uptrend."
Matthew Graham : "If we just focus on the uptrend that we're probably in, then something around 1.947 would be today's critical support level. http://tinyurl.com/bajbvmb"
Clayton Sandy : "REPRICE: 1:03 PM - Provident Funding Better"
Matthew Graham : "if someone theoretically charted this with horizontal red lines at 1.80, 1.86, and 1.92, and also threw in several potentially informative directional trendlines that have persisted since mid 2012, it may or may not look something like this: http://tinyurl.com/a6xhpn2
Matthew Graham : "not necessarily. It depends if you're looking at outright levels (horizontal lines) or directional trends (sloped lines) or even other technicals. A case can be made for a long term inflection "zone" from 1.80 to 1.92-ish. In that sense, we're currently testing a break outside the longstanding range from 1.55-1.85 (longstanding = since mid May 2012"
Victor Burek : "mg..any level on 10yr that we shoudl hope to hold?"
Victor Burek : "no way u/e rate gets to 6.5 in 2013"
Victor Burek : "i was very surprised with the Fed announcement.. they tied easing with u/e rate, so was surprised many thought qe would end sooner"
Tim Mitchell : "I know it's hard to predict a stunner like yesterdays announcement, but was there any warning in here of the upcoming FED announcement and the potential of a shake up?"
Gus Floropoulos : "if the client didnt lock, but u gave him the knowledge and expertise on why they should, and they didnt listen.....well now u look pretty smart, thanks MBS Live!"
Matt Hodges : "our purchase market has already heated up. refinances are nice, but that's not the biz"
Scott Rieke : "I think possibly the opposite - will push those that dont want to miss out"
Steve Chizmadia : "I do think it will slow down in take and submissions, yes"
Christopher Stevens : "SC- you really think this minor move up in pricing will slow refinances down that much?"
Steve Chizmadia : "If these levels hold or worsen we can all expect some drastically improved turntimes"
Matthew Graham : "CS, I don't think everyone is so "up in arms." It's just a matter of perspective. If we were here to look at the big picture only, today would merely be interesting, but a bunch of mortgage market folks considering intraday reprice risk.... That environment lends itself to putting a magnifying glass on day to day moves. That's the nature of the beast."
Gus Floropoulos : "yea, just being optimistic, although I think we are heading to 2.25 before 1.6"
Matthew Graham : "There is a ceiling Gus! But it's upwardly sloped!"
Matthew Graham : "yes, hopefully the trend reverses, but the point is that we've begun a new nasty trend. Sometimes these things are false starts, and sometimes the beginning of extended ugliness. All you can do is wait and see while playing defense in the meantime."
Christopher Stevens : "We are still looking at best ex at 3.5% why is everyone so up in arms"
Gus Floropoulos : "hopefully the 10 yr can form a ceiling at this level, and perhaps we get some type of a relief rally followd by the short squeeze"
John Rodgers : "besides gus' comment in the last 24 hours the best LO comment I've seen has come from Matt hodges: orginate, dock, LOCK and reload"
Matthew Graham : "oh wait... high volume breakout y'day, high volume confirmation so far this morning = bounce back has more to prove at this point than a shift in trend."
Matthew Graham : "obviously overdone CK, which is why we've quickly bounced back into the green today?"
Chris Kopec : "Even the folks at CNBC this morning were indicating the bond rout from yesterday was overdone."
Gus Floropoulos : "i think we're jumping the gun, less than a year ago the 10 year was around 2.40, we are still in a great situation, and even better with the employment market improving, housing stabilizing, we should benefit from the overall economic improvement down the road"
Matthew Graham : "that would be great, but "getting a decent amount back" is the underdog scenario at this point. "
Chris Kopec : "I think we get back a decent amount of what we lost yesterday, possibly by next week.
Victor Burek : "the cliff deal also raised taxes on just about every American...more taxes, less spending, bad for economy good for rates"
Victor Burek : "agreed...bad on the cuts side..but the cliff deal didnt end the cuts..just postponed them for 2 months..then auto spending cuts of 110b"
John Rodgers : "w/o entitlement reform who will buy our debt if the fed is out of the market?"
John Rodgers : "
while a lot of you will disagree with me, the cliff deal is actual really bad for bonds long term