Overnight news regarding a bailout plan for Cyprus dominated trading in Asian and European hours as markets took flight from riskier assets (and from Cypriot ATMs) for safer havens such as mattresses, safes, and core country bond markets. Volume was surprisingly light given the apparent level of drama (not lighter than average, but not significantly bigger than average either). By the time US markets were underway, most of the adjustments had played out and we were left with quite a flat range in MBS and Treasuries. 10yr yields favored a channel between 1.9442 and 1.965, effectively grinding around the 1.95 pivot mentioned in the last update. MBS opened just under 103-00 in Fannie 3.0s and stayed within striking distance all day long, giving lenders some room to improve rate sheets. For many, it was the best day-over-day improvement since Italy's election.
MBS Pricing Snapshot
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Pricing as of 4:03 PM EST
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Live Chat Featured Comments
Andy Pada : "maybe not more concerned, but equally concerned."
Andy Pada : "I am more concerned about loans that are underwater closed after May 2009."
Todd Hernandez : "They could convert those Non-Agency mortgages subprime into FHA loans? Would that require Congressional Approval?BO executive Order?"
Ryan Kelly : "Obama's bill is focused non-agency owned mortgages, specifically the subprime loans that were done in prior to 2009. He wants to provide these people that are underwater with high interest rates relief as well"
Jeff Anderson : "13% chance of it getting by committee and a 2% chance of it getting enacted. "So you're saying there's a chance.""
Ryan Kelly : "no change to the date, basically the proposed changes are to allow any originator to do what the existing servicer can do. They also want to find another solution to appriasal alternatives, they don't believe the existing systems provides low cost options for enough borrowers"
Andrew Russell : "what are the provisions Ryan?"
Ryan Kelly : "http://www.govtrack.us/congress/bills/113/s249"
Ryan Kelly : "www.wh.gov/refi"
Ryan Kelly : "obama has a refi proposal he is pushing but again low confidence in it passing. www.wh.gv/refi"
Ryan Kelly : "only the resposible homeowner refinance act of 2013, most people have low confidence in it passing"
Todd Hernandez : "Has anyone heard anything about rumors of HARP 3.0? "
Rob Clark : "REPRICE: 12:35 PM - Provident Funding Better"
Jeff Anderson : "About 1million people in Cypress versus 10 million people in Greece, although their banking system is quite large compared to the size of their country. If there aren't any runs on any other countries banks in the next few days, I guess this just goes away?"
Brent Borcherding : "At date, it's JUST Cyprus, and less people care about Cyprus than care about Greece. Gus, do you care about Cyprus? Look this is only an issue if the people of Europe make it an issue. To flip the coin, if the europeans don't make a run on the banks, then frankly this is good for Europe. It means they have an alternative solution, just rob the people. In reality, the europeans aren't likely to stand by and do nothing but until they do...."
Edgar : "We'll see how the rest of the day goes but clearly American investors don't care about Europe. We need a new "Europe". "
Brent Borcherding : "I'm not really joking in my response, nothing has TRULY happened yet. I'd expect the all's well sign to be shown up until their is actual response by European citizens, i.e. runs on the bank."
Steve Chizmadia : "If MBS continue to perform like they have the last 4 business days, I don't really care or read into equities too much. "
Jeff Anderson : "Was just going to say that VB. Wow. All is well, apparently. It did feel that way when the futures started to pare the losses this AM. "
Brent Borcherding : "Well, you can't be too surprised by that Vic."
Victor Burek : "nasdaq is in the green, dow and s&p to soon follow"
Brent Borcherding : ""irrational exuberance"?"
Victor Burek : "dow about to go Green"
Matthew Graham : "apparently not everyone in Cyprus, but enough investors to bid Bunds and USTs up to inflation-adjust negative yields (and at a few moments, non-adjusted negative yields in short term Bunds iirc)"
Victor Burek : "that assumption is no longer true"
Victor Burek : "people, like us, assume savings are safe as they have an equivilent to FDIC there"
Victor Burek : "not everyone"
Matthew Graham : "that's what Europe has been doing for 2+ years"
Victor Burek : "they better try, but if i had money in a spain bank, french bank, italian bank, etc... i would be withdrawing all of it as quick as possible"
Matt Hodges : "i think on the contrary, they've created another animal, which means that every time there's a crisis, they rewrite the manual"
Matthew Graham : "I don't think they can undo the doubt that this creates, but they can lessen its pervasiveness."