Heading into today, we characterized the prevailing range this week as compelling, and that it would need to be confronted with a serious surprise in order to veer off course ahead of next week's big-ticket events. This turns out to have been a major understatement. Trading was, in fact, far flatter and less dramatic than it could have been, simply strengthening the sideways themes in play following the Italian election. For Treasuries, that sideways-ness played out 2-4 bps lower in yield vs yesterday, but MBS underperformed. The range in Fannie 3.0s rested mostly above yesterday's highs, but didn't manage to gap out to the same extent that Treasuries did. Data was mostly uneventful though markets did move following ISM at 10am. Whether this was more to do with ISM or more about stock market determination surfacing just after the cash open (which we've seen several times this week), doesn't much matter due to the relative absence of bond market reaction by the end of the day (same levels now as 10am for Treasuries. Next week's data is bigger-ticket with Employment Situation on Friday, ECB on Thursday, as well as ADP and ISM Non-Manufacturing earlier in 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 4:02 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
Reprice Risk Increasing MBS Continue To Underperform
Although rising equities have been putting some pressure on bond markets, it hasn't been enough to coax 10yr yields over their 10am-11am highs (around 1.867, now back down to 1.8584). That said, MBS have been underperforming Treasuries sufficiently to leave Fannie 3.0's right in line with their 10:30am lows.
Given that prices haven't actually broken lower, negative reprice risk is contained in that regard, but the underperformance and the mere revisiting of the lows suggests that whatever amount of negative reprice risk was in the air this morning, persists into the afternoon.
Bottom line, things look a bit worse than they did heading into the noon hour. Widespread reprices aren't likely here, but one or two wouldn't be out of the question depending on the lender. A break to 103-18 or below--which could happen soon if the trend isn't reversed--would increase those risks., as well as the risk that the negative trend continues into the afternoon.
Live Chat Featured Comments
Dirk Postupack : "Roger......this is from 5/3rd....*Mortgage Insurance transfer only available through MGIC, Genworth, United Guaranty and Radian at this time."
Jeff Anderson : "Ha! http://blogs.marketwatch.com/election/2013/03/01/obamas-jedi-mind-meld-mixes-his-sci-fi-metaphors/"
Roger Moore : "does anybody have a lender that will transfer UG (united guarantee) MI on a harp loan?"
Matt Hodges : "Roland - can you stall the purchase out maybe 2 months worth of new paystubs - showing similar income stream?"
Matthew Graham : "yes, it came up earlier. the two answers (maybe not a conclusive list) were that the trend has been toward underperformance all year, and that investors are starting to shift toward April coupons with the roll approaching. I'd expect new origination volumes to be decent today as well, but I haven't heard anything specific on that yet."
Roland Wilcox : "Union and a host of others said no, my good friend Wells pvt bnkg said no unless brwr deposits $1M -- kinda stuck -- borrower mentioned this casually yesterday as in "did I tell you I changed jobs?""
Victor Burek : "mbs didnt sell off as much as treasuries did when they went back in the 1.90s"
Chris Kopec : "Sorry if this has already been addressed, but any feeling for why MBS seems to be underperforming Treasuries?....or am I missing something?"
Roland Wilcox : "Yes, commissioned for 8 yrs at previous employer, similar comp"
Justin Bayle : "Was he commission before Roland?"
Roland Wilcox : "Looking for lender for $1M purch $800k loan -- excellent credit, income, reserves, but borrower started new job Feb 4 and comp is production-based commission. New job similar to previous (bond trader), but having difficulty finding lender. Suggestions welcome! "
Matthew Graham : "RTRS- OBAMA SAYS CAN MAKE PROGRESS ON OTHER PRIORITIES WHILE BUDGET CUT ISSUE REMAINS UNRESOLVED, SUCH AS IMMIGRATION REFORM, GUN CONTROL AND MINIMUM WAGE HIKE "
Matthew Graham : "RTRS- OBAMA SAYS "CAUCUS OF COMMON SENSE" ON CAPITOL HILL IS LOOKING FOR COMPROMISE ON TAX AND ENTITLEMENT REFORMS "
Matthew Graham : "RTRS - OBAMA SAYS FURLOUGHS, PAY CUTS WILL CAUSE RIPPLE EFFECT THROUGH THE ECONOMY "
Matthew Graham : "RTRS - OBAMA SAYS NOT EVERYONE WILL FEEL THE PAIN OF THESE CUTS RIGHT AWAY, BUT PAIN WILL BE REAL "
Matthew Graham : "RTRS- OBAMA SAYS URGED CONGRESSIONAL LEADERS TO COMPROMISE OVER LOOMING BUDGET CUTS "
Eric Franson : "REPRICE: 11:34 AM - Wells Fargo Worse"