Wax-on: solid gains throughout the day on Monday. Wax-off: gains mostly erased in Europe overnight on Tuesday. Wednesday, then, is "wax-on, risk-off" as bond markets hit the domestic session near their highs ("risk-off" connotes bond market demand at the expense of equities weakness). The memo to take that wax back off went out too early as bond markets gave up ground into the afternoon, but European headlines were there to reinvigorate enough of a risk-off bid for Treasuries and MBS that we made it back to morning levels. Confused? Basically, the past two days have been good, then bad. Today was good, then bad, then good again, and looks to be heading out while still remaining good. We're reduced to conversing about the market in such a manner when nothing is happening. FYI, nothing is happening. Afternoon EU-risk-related headlines (see them in the alert below) merely made for an adjustment within the broader consolidative ranges heading into tomorrow morning's ECB Announcement--the first potential market mover of the week.
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 4:07 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 Bounce Back As Markets Swing Back Toward "Risk-Off"
It's really just like the 'good old days' when stocks and bonds could be counted on to move in the same direction in similar amounts relative to previous moves. Actually, in the current case, we're seeing bond markets express a bit more of the "risk-off" sentiment than stocks, though both are participating. The Euro is participating as well after Italian prosecutors announced the seizure of €40 mln in connection with the unfolding Monte Paschi drama. Around the same time, a Bloomberg story began making rounds, in which Citi's Chief Economist Wllem Buiter said that the EU asset boom "looks fragile."
We'll stop short of assigning the noticeable swing in MBS and Treasuries to either one of these headlines as there are/were tradeflow considerations in play as well. All of the above is compounded by the fact that markets have been pretty "sleepy" until now, and minor developments are having bigger impacts than they otherwise might.
Unlike the morning hours, it's now working in our favor. MBS are up 5 ticks on the day now at 103-13, 10yr yields have bounced back to test 1.97 and S&P's have come off about 5-6 points. The swing for MBS essentially unwinds any previous reprice risk and perhaps even tilts it positively (though we'd want to see current levels held or improved upon slightly before expecting more than one or two token reprices).
Live Chat Featured Comments
Eric Leithliter : "REPRICE: 3:07 PM - Pinnacle Better"
Brent Borcherding : "Unfortunately, that is the current answer to any questioning parties...us included."
John Paul Mulchay : "Initial interpretations include ALL fees paid by consumer, not excluding 3rd party fees. I think Ira is correct to lean on those paid to kinterpret."
Ira Selwin : "So anyone that says they know what it really means unfortunately doesn't"
Ira Selwin : "Yeh, it's a grey area right now."
Matt Hodges : "i'm asked about it by media, Realtors and consumers"
Ira Selwin : "(your compliance department may be able to help as well)"
Ira Selwin : "Don't bother until you have further clarification."
Matt Hodges : "but, since QM is vague, i don't know how to read that one line"
Matt Hodges : "i would assume that means paid to lender, not third party fees, correct?"
Matt Hodges : "Q about QM "Finally, a loan generally cannot be a qualified mortgage if the points and fees paid by the consumer exceed three percent of the total loan amount..." How do you read that?"
Jason Wilborn : "some lenders might pass on an 1/8th"
Jason York : "prob not, we are only a few ticks up from when pricing generally came out"
Scott Valins : "re-price territory?"
Jason York : "we just got a message that we are back up and running now"
Mario Ingraffia : "Anyone else still having issue with VA ordering coe and va case number?"
Jason Anker : "they want to make FHA so bad that private money will step in at a lower cost to fill that "risky" bucket. Lots of wealth tied up in Houseing is now gone, lots of 200k houshold incomes have very little cash"
Andy Pada : "I've been thinking about this FHA issue and it seems that since FHA was created post Depression, they are probably doing exactly what they are supposed to do."
Clayton Sandy : "REPRICE: 1:47 PM - Provident Funding Better"
Jeff Anderson : "Found it. http://online.wsj.com/article/SB10001424127887323539804578264272974489236.html"
Jeff Anderson : "Did anyone see the article today on how a number of the Investment arms of banks are doing 100% Jumbo loans for clients with sizable portfolios?"
Jason Anker : "more than 3.5% yes but 20%+ & reserves? nothing in the middle"
Andy Pada : "We need to ask ourselves is what role, if any, should the federal government play in homeownership?"
John Paul Mulchay : "If you're spending 700k+ , I would expect that you have saved more than 3.5% or probably should hold off on buying that home."
Jason Anker : "there is still a sub-set of borrower currently underserved in my market. I have high income, young people who can;t put 20% down and have 12 months reserves, yet all other aspects of the loan are great. "
Matthew Graham : "I think it's strayed too, but strayed vs "stepped up to help stop the bleeding" i think is the counterargument. I don't have a strong opinion here."
Andy Pada : "the more focused argument has some merit if you believe that there can be a private MI market."
Matt Hodges : "FHA was meant for credit challenged and lower income folks. Over $417K i think confirms it's strayed"
Matthew Graham : "main contention seems to be that "loan amounts as high as $729k" mean that FHA has "strayed too far from its original mission." Hensarling says that by offering insurance on loans up to those amounts and under riskier terms than private competitors, FHA has become too big to fail, "controlling" 56 pct of the total mortgage insurance market."
John Paul Mulchay : "FHA didn't get in the way when the market was booming and it sustained housing when it collapsed. Seems like it has a role to me...."
Ted Rood : "Funny, no one was saying that for 1970-2005 when FHA was going crazy on purchases prior to Flex 100's, etc"
Matt Hodges : "interpretation: FHA is unsustainable and we don't want to pay their future bills"
Matthew Graham : "Rep Hensarling says FHA is an impediment to a sustainable and competitive housing finance system (in committee hearing today). Discuss..."
Matthew Graham : "few minutes prior to that, BN-CITI'S BUITER SAYS EURO-AREA ASSET BOOM LOOKS `FRAGILE'"
Matthew Graham : "This move was in the works before that wire came across, but it may be adding to the 'risk-off" swing"
Matthew Graham : "RTRS - ITALIAN PROSECUTORS SAY ORDERED SEIZURE OF 40 MLN EUROS IN FUNDS FROM BANKS AND TRUSTEES ON SUSPICION OF FRAUD IN CONNECTION WITH MONTE PASCHI "
Mike Drews : "So far, so good MG"
Matt Hodges : "ST had an issue delivering rates this morning...they are now posted - govie about .25 better, fyi"
Matthew Graham : "would be nice to see TSYs treat it less like Mendoza and more like Maginot."
Mike Drews : "10 yr flirting with the Mendoza line"
Matthew Graham : "stocks, tsys, MBS, all testing outer limits of AM ranges together. "
Dez Loessberg : "REPRICE: 12:03 PM - Sun West Mortgage Worse"
Ira Selwin : "JW - try this link: https://www.fanniemae.com/content/faq/project-review-summary-faqs.pdf"