Bond markets coasted into their best levels since the first trading day of the year and spent the rest of the day holding a tight range around those levels. Fannie 3.0s stayed between 104-10 and 104-13 for the most part while 10yr yields cut a 1.836 to 1.866 range. This is about the most equivocal thing they could have done considering that 1.865 is the long term inflection point we've been tracking. It can also be seen as part of a "zone' in the bigger picture, defined by 1.865 on the high side and 1.84 on the low side. In that sense, yields merely stay in the middle of that inflection point, without making a clear move to one side or the other. It should be noted that Bernanke has yet to speak today, and his comments could serve as a late day market mover today or set the tone ahead of tomorrow's economic data.
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
Negative Reprice Reported, Despite MBS Holding Steady
The majority of today's trading in MBS has taken place in a 3 tick range between 104-10 and 104-13, with current prices at 104-11. Despite the strong, steady prices, we just saw one negative reprice. Motivations can only be guessed at, but certainly a contender would be "pipeline control" after potentially high "relief lock" volume on today's "best of 2013" rate sheets.
Not all lenders are necessarily back down to January 2nd levels today, but most are close. Some lenders "throttle" inbound lock volume by raising rates, though not frequently. Is it a sign that we could see more like this in the next few hours? Only 1-2 lenders are even possibilities for such a thing at current price levels. We'd still need to see a marked break below 104-10 before there would be any hint of negative reprice risk due to MBS Price movements.
MBS Hit Lows, But Holding Sideways In Quiet Trading.
Without much by way of headline cause & effect, bond markets have leaked into their weakest territory of the day with 10yr yields pushing the mid 1.86's and Fannie 3.0's down to 104-10, 4 ticks from their earlier highs.
Both MBS and Treasuries weakened somewhat during Obama's address which centered on the upcoming debt ceiling debate, but several Fed speeches were also out during that time, perhaps giving markets a bit more to consider ahead of Bernanke's speech tonight.
Current levels are probably best-viewed as a sort of line in the sand. At or above these prices, reprice risk is minimal, if it exists at all. It could begin to increase if we dip to 104-09 or below. All that having been said, markets aren't terribly active and trading hasn't been terribly directional--prefering instead to grind sideways at these lows of the day (lows that are still 2 ticks better than Friday's close).
Fed's Williams sees need for QE3 "well into" second half of 2013
(Reuters) - The Federal Reserve will need to continue with its bond-buying program for most of the rest of this year as it tries to push down borrowing costs and an unemployment rate that is still too high, a top Fed official said on Monday.
"The Fed must do what it can to help the economy improve," John Williams, president of the San Francisco Federal Reserve Bank, said in remarks prepared for delivery to the SEMI 2013 Industry Strategy Symposium. "I anticipate that continued purchases of mortgage-backed securities and longer-term Treasury securities will be needed well into the second half of 2013."
Last month, the Fed ramped up asset purchases aimed at spurring growth and pledged to keep interest rates near zero until the unemployment rate drops to 6.5 percent, as long as inflation expectations do not climb above 2.5 percent.
Williams -- who used his vote last year on the Fed's policy-setting panel to support those decisions -- said he sees the U.S. economy growing 2.5 percent this year and a little under 3.5 percent next year. Unemployment, which registered 7.8 percent in December, will likely stay at 7 percent or above through the end of 2014, he said. And with labor costs low, he said he sees inflation likely to come in at 1.5 percent and stay below the Fed's 2 percent goal for the next few years.
Williams' economic forecast shows that he sees the Fed keeping rates near zero into at least 2015, in line with the U.S. central bank's own guidance on low rates.
"We will keep rates low as long as needed to promote recovery and move toward our goals of maximum employment and price stability," Williams said.
Live Chat Featured Comments
Clayton Sandy : "REPRICE: 3:11 PM - Provident Funding Worse"
David Z. : "https://petitions.whitehouse.gov/petition/make-formal-request-fhfa-eliminate-securitization-cut-date-harp-eligibility-and-allow-re-harping/BlPYbvZw?utm_source=wh.gov&utm_medium=shorturl&utm_campaign=shorturl"
Matt Sullivan : "freedom mortgage"
Adam Dahill : "Hey guys FHA lender question. Who are you going for your 620-660 fico and above 50% DTI? My FHA banking channel is being a little more conservative and looking to see if there are any other options"
Jason Zimmer : "http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2011/HUDNo.11-108"
Thomas Nelson : "It's an overlay....I gave you the FNMA guidelines. Just did 3 like this. That stinks that they are overlaying that for you guys."
Brent Borcherding : "I have the same issue, Michael."
Michael Gannon : "Thomas even with the affidavit I have not seen our investors purchase this. We will not close if someone is on maternity. "
Matt Hodges : "Neither WF nor USB disallow approval on maternity"
Kim : "I just had this on one of mine. Maternity leave is like any other leave (not discriminating...but treated the same as any "leave"). In my experience they can deny because of this. Many people do not got back after a long leave like that."
Michael Gannon : "A teacher in NYC that is tenured has 5 years to return to work"
Thomas Nelson : "Michael, employer can't prevent them from going back to work. The old arguement was that borrower may not actually go back.....that's why you get the affidavit with both parties stating return date."
Michael Gannon : "I agree in theory but to play devils advocate the borrower/mother doesnt have to return to work in any specific amount of time. "
Michael Gannon : "borrower is not currently working and receiving a pay check....."
Brent Borcherding : "My lenders will not use maternity leave income...must be back at work."
Grant R. Menard : "Matt it has been my personal experience that they want the first paystub once they return. "
Matt Hodges : "been long time since i've dealt with this: borrower is currently FT employee, and it going out on maternity leave late this month - pay stubs fine. in late February closing, we'll do verbal - still employed, but on maternity leave. Issues?"
Matthew Graham : "RTRS- LOCKHART SAYS DECEMBER ACTION SHOULD NOT BE VIEWED AS NEW STIMULUS BUT RATHER A CONTINUATION POLICY ALREADY IN PLACE "
Matthew Graham : "RTRS - WILLIAMS: WHEN TIME COMES FOR EXIT FROM EASY POLICY, FED CAN RAISE RATES PAID ON BANK RESERVES AND PREVENT INFLATION "
Matthew Graham : "RTRS - WILLIAMS: FISCAL CLIFF FIX ONLY KICKED CAN DOWN ROAD FOR HARD FISCAL CHOICES "
Ted Rood : "First MBS QE was announced as I was leaving for Thanksgiving break. Rates improved about three times that day as I was unavailable to write loans."
Matthew Graham : "not continuous depending on your definition. If you count "reinvestments" then it's continuous. Otherwise, QE3 was the first "new printing" since QE2"
Andy Pada : "so have we had some form of QE on a continuous basis for the last 4 years?"
Matthew Graham : "MBS QE was announced in late 2008 and incepted at the beginning of 2009."
Matthew Graham : "RTRS - FED'S WILLIAMS: RIGHT NOW, FISCAL CLIFF HEADS LIST OF THINGS 'THAT KEEP US UP AT NIGHT'"