MBS Live: MBS Morning Market Summary
While MBS prices were slightly higher in the middle of last week and on the first few days of the year, until Friday's roll, the price referred to January coupons.  February coupons are trading within a few ticks of their highest levels of the year, though we've seen firm resistance against any moves higher so far this morning.  Given that Treasury benchmarks are similarly stonewalled near their lowest yields of the year, the resistance is easy enough to reconcile.  While the identification of the reasons for resistance doesn't predict the future, it can add to the importance of current levels.  Specifically, if this morning's low yields in 10yr Treasuries around 1.836 hold as a floor through the day, it would reinforce a broader sideways "zone" between there and 1.865.  A move lower could pave the way for additional ratcheting lower, though Bernanke's speech tonight and several pieces of economic data in the morning could be more important than the technical levels, depending on the information conveyed.
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
104-11 : +0-03
FNMA 3.5
106-05 : +0-02
FNMA 4.0
106-25 : +0-00
FNMA 4.5
107-23 : +0-01
GNMA 3.0
105-18 : +0-04
GNMA 3.5
108-06 : +0-04
GNMA 4.0
109-10 : +0-01
GNMA 4.5
109-12 : +0-00
104-02 : +0-03
105-29 : +0-03
106-14 : +0-00
106-31 : +0-01
Pricing as of 11:06 AM EST
Morning 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 morning.

10:01AM  :  Calmly Holding Overnight Gains As Resistance Sets In
The overnight session marked something of a departure from last week's examples as European bond markets stayed relatively less volatile, encouraging US Treasuries to do the same. Japan was out on Holiday, precluding the normal start time for overnight Treasuries, but indirectly proved to be one of the main drivers of the subsequent move lower in yield. Japan is considering a $558 bln bond-buying initiative that would be targeted at foreign debt in order to keep the Yen at export-friendly levels. US Treasuries would be a major component of any eventual program, and with the majority political party backing the move, it's a possibility that markets seem to be taking seriously.

Beyond that the generally calm and well-contained nature of the overnight gains fails to suggest huge, direct "cause and effect" between events and headlines. That's not to say that events aren't contributing to movement, but everything has been more gradual. The fundamental and technical pictures appear balanced and their individual considerations appear to be viewed as more of a package deal, ALLOWING (rather than "suggesting") Treasuries drift calmly to lower yields overnight.

That brought 10yr yields in the door just under 1.84% and MBS at 104-14. Therein lie some clues to the technical picture and the apparent lack of desire to stampede into stronger territory. The first clue is that these levels are the best (or close to the best, considering February MBS Coupons) of the year. Treasuries were just over 1bp lower on January 2nd, but by the morning of January 3rd they'd seen their last hourly closing level below 1.84 until this morning. Additionally, 1.84% would be the lower end of a "zone" of yields that comprises a massively important inflection point for Treasuries (the higher end being the much-discussed 1.865%).

As such, there's a ample justification for things getting less decisive and more "grindy" at current levels. Even as stock markets fall 3-5 points in the S&P right now, bond markets look like they can't be bothered to participate in such things. We'd have to imagine that any further gains from here would either have to be motivated by a significant and unexpected headline, or face increasingly firm resistance as 10's approach the January 2nd lows at 1.8178.

10's are currently at 1.8395 and MBS are up 5 ticks on the day at 104-14 and have traded a narrow range down to 104-11 at their worst. Obama is scheduled for a news conference at 11:15am Eastern (topic unknown) and Bernanke speaks late this afternoon. The scheduled Fed buyback from 10:15-11:00 is the next informative event for bond markets on the otherwise data-free morning and as always, volatility is possible just after 11:00am.
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.

Steven Stone  :  "now all they are left with are people that cant refi out or those who are terrible credit quality and are at a much higher risk for default"
Steven Stone  :  "so raising MI lowers credit quality and actually costs the FHA more"
Victor Burek  :  "basically FHA will be subprime"
Victor Burek  :  "sure..so fha is just gonna get the slop deals"
Steven Stone  :  "the only borrowers that you would put in an FHA are the ones that are the highest risk"
Steven Stone  :  "VB what you are pointing out is what the problem is"
Victor Burek  :  "or had a bk in the last few years"
Victor Burek  :  "what if your friend needed a gift for dp?"
Steven Stone  :  "I would have them put 5% down and get a conentional"
Steven Stone  :  "Today if my best friend called me up and said they were buying a house"
Steven Stone  :  "The FHA at one time had a great product that made sense"
Steven Stone  :  "Its hard to justify an FHA loan for a purchase"
Steven Stone  :  "As a loan officer, you have a fiduciary responsibility to your customer. You have to put them in a program that makes sense"
Steven Stone  :  "MIP is already too high...making it higer further pushes FHA out of the range of reasonability as an option "
Steven Stone  :  "the reality is that there are PMI companies that have comprable products with much lower costs"
James Barnes  :  "2.05 is much higher and if it is permanent, that will kill many deals. Lets hope the Senate gets enough pressure to at least drop the permanent feature. Wish they would go back to 3.8% upfront and .50 a year and stick to the ratios if they have to change something....."
B-C  :  "agreed MH, when MI went up to 1.2% a lot of folks said FHA business would die"
Matt Hodges  :  "JB - we've had numerous changes over the past 5.5 years - thinking August, 2008. Have you become stronger or weaker in your loan performance. I have become more profitable, as unqualified LOs exit."
Ira Selwin  :  "Time to look at more Conventional business - 5% down. Also, the latest QM rules talked about GSE/FHA loans run through AUS/Scorecard not having the 43% restriction for QM."
James Barnes  :  "Upcoming FHA MIP Changes With the Senate voting on changing the MIP once again, how will it affect your business? The new bill will raise the annual MIP to 2.05% a year and it will be permanent. Thats 341 dollars a month on a 200k loan for MIP!! About 60% or more of my business is FHA and first time home buyers and I think it will crush the new home construction business and first time home buyer especially if they start enforcing the 43 back ratio. What do you think?"
Jeff Anderson  :  "Gm, all. 10 year under 1.84. Very nice. TGIM."
Oliver S. Orlicki  :  "Gm. Green starts are always a good way to start the week off."

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