Yesterday, we noted that Jobless Claims and Mario Draghi's press conference delivered a one-two punch to the hopes of sustaining recently improved ranges in bond markets. Today then, was the haymaker, courtesy of a significantly stronger-than-expected Jobs report. After tonight's Fannie/Freddie 30yr Fixed Roll, Fannie 3.0s will be very close to 102-00! This was the outer limit of weakness suggested in this morning's preview. The corresponding outer limit of 2.10% in 10yr yields was similarly approached, but 10's managed to skid sideways near 2.05 in the afternoon. That particular level is a bit of a predicament, technically speaking, as it is very close to the defensive ceilings seen so far in 2013. The troublesome aspect is that the intraday price action clearly broke to new highs in clearly heavy volume, immediately following a highly anticipated event. This intraday pop does more to suggest the continuation of the long term uptrend in rates than the end-of-day ground holding does to suggest--well... Ground holding... Even selling trends aren't without their moments of respite, however, and this week's selling trend has been so relentless that it's historically unlikely we won't see a moderate bounce next week (but please note, in past instances where 5 straight days of heavy selling have NOT resulted in a moderate bounce, it's been very ugly).
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 4:09 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 Risk Already Increasing, Depending On Lender
Despite the fact that we just got one positive reprice (certainly justified at the time), any lenders who priced closer to 10am, and especially those who priced after 10am are already looking at sufficient MBS losses to justify negative reprices. This, of course, depends on the lender, their specific timing, and their individual pricing strategies, but for instance Fannie 3.0s were at 102-16 at 10:12 AM and are now 10 ticks lower at 102-06. That's almost always the sort of gap that prompts negative reprices. Lenders were probably hedged a bit aggressively considering the big moves at the open, but it several cases, it's probably not aggressive enough to avoid some new rate sheets if we stay at current levels for more than a few minutes.
Live Chat Featured Comments
Tom Schwab : "REPRICE: 12:51 PM - AMC Worse"
Matthew Graham : "eh... i don't know BB. it's the kind of thing I would have liked to have seen hold up intraday. The damage that a break of 2.05 could do has already been done regardless of the 3pm yield. Silver lining maybe."
Brent Borcherding : "MG--How much value would you put to closing the day under 2.5 on the 10 yr today?"
Andy Pada : "There is our Italy news, albeit somewhat innocuous"
MC : "REPRICE: 12:17 PM - Flagstar Worse"
Matthew Graham : "RTRS - FITCH SAYS IT COULD CUT ITALY FURTHER IF RECESSION IS DEEPER AND LONGER THAN FORECAST "
Matthew Graham : "RTRS - FITCH SAYS ITALY DOWNGRADE COMES ON INCONCLUSIVE ELECTIONS AND ONGOING RECESSION "
Matthew Graham : "RTRS - FITCH DOWNGRADES ITALY TO 'BBB+'; OUTLOOK NEGATIVE"
Eric Franson : "Within 30 minutes I would assume NM."
Matt Hodges : "sure looks like it, nate"
Nate Miller : "guessing WF is taking their "better" back about now..."
Andrew Horowitz : "tend to agree MG, this has been a slow pregression higher and it has been orderly"
Matthew Graham : "yes and 30bps of the sell-off happened in two days, and it was unwound in less than a month. There are similarities and differences. This time around, the slow and steady nature of the weakness combined with some fundamental changes is more disconcerting for me."
Joe Daquino : "Just want to remind everyone that the 10YR was as high as 2.40 last year around the 3rd week of March."
Timothy Baron : "Dustin, I see your point, but I don't think it'll fly. You'll most likely need the rent to show on the Sch E."
Eric Franson : "REPRICE: 11:35 AM - Wells Fargo Better"
James Barnes : "Wonder how many of these jobs are related to rebuilding from Sandy?"
Matt Hodges : "the 7-8 tic drop will be roughly 5pm"
Matt Hodges : "we haven't rolled "
Caroline Roy : "how are MBS doing on the day given the roll? just getting in today. "
Dustin McAlister : "*renting out another home for last 12 months as their primary residence"
Dustin McAlister : "DU doesn't and it isn;t on the 1040 because they started renting it out last april, however it was put on a 3 year lease and it managed by a rental company, also they have been renting out a home in another state for the last 12 months...so it isn't their primary residence they are converting into a invesment property they way i see it according to how ALL REGS is worded"
Steve Chizmadia : "Dustin, it looks like your question got buried, but with a full year 1040 showing the home they rented on the schedule E, you should be good to go as long as your investor does not require two years experience as a landlord"