Headlines concerning the Cyprus bailout and it's various components streamed in at a healthy clip almost all day. As such, bond markets rallied almost all day, beginning with US Treasuries in the overnight session. For instance, 10yr yields fell from 1.97 in the Asian session to just over 1.89 by 1:30pm this afternoon. MBS were painfully unwilling to keep pace with such a move--a task made all the more challenging by a larger than normal dose of new origination supply. Even without the supply, it's not customary for mortgages to reap as much benefit from these sorts of flights-to-safety, and the double helping of uphill battles is apparent on the charts with MBS gaining only 6 ticks in price vs 10's 16 ticks. That made for a yield spread widening of several bps on the day and brings MBS back to their recently widest levels. Hopefully this translates into "most attractive levels" in tomorrows session which will finally have something other than Cyprus to consider. The FOMC Announcement goes off at 12:30pm, an earlier than historically normal time slot to make room for the Member Forecasts at 2pm and a Bernanke Press Conference at 2:15pm.
MBS Pricing Snapshot
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Pricing as of 3:03 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
Bond Market Gains Holding Ground Amid Volatility
The day thus far has been a prodigious parade of Cyprus-related headlines with the most recent few falling on mostly deaf ears as domestic markets reach the burnout stages of their attention span. The whole universe of "risk" bottomed out in unison around 1:30pm as stock prices, Euros, Bund yields, and US Treasuries all hit their session lows and slowly began marching in the other direction.
For MBS, this also marked the highs in terms of price with Fannie 3.0s touching 103-07. Since then, we've gotten one more headline:
RTRS- - ECB SAYS TAKES NOTE OF CYPRUS PARLIAMENT VOTE, REAFFIRMS COMMITMENT TO PROVIDE LIQUIDITY AS NEEDED WITHIN RULES
This understandably spooked bond markets, but the reaction was surprisingly brief. 10's Spiked quickly from 1.91 to 1.92 and are now back down to 1.905. Equities spiked. The Euro spiked BIG. Now both of those are at least halfway back down to previous levels.
MBS dipped from 103-04 to 103-02 and are back to 103-04. It's too soon to tell if the ECB headline is going to have some sort of lasting effect that solidifies the reversal, but at the very least, that's a possibility. That said, the predominant momentum looks to be more sideways (as opposed to higher in rate or lower in MBS Prices) for now, possibly even turning back toward bullishness. We'll let you know if that changes.
Live Chat Featured Comments
JRS : "REPRICE: 3:05 PM - Stonegate Mortgage Better"
Nate Miller : "REPRICE: 3:03 PM - Caliber Funding Better"
Matthew Graham : "RTRS- CYPRIOT PARLIAMENT REJECTS TAX ON BANK DEPOSITS AS CONDITION OF INTERNATIONAL BAILOUT "
Rob Clark : "36 against, 19 abstain"
Tom Schwab : "REPRICE: 2:06 PM - AMC Better"
Ira Selwin : "You may want to double check investor guides as it may not be needed if not using rental income to qualify"
Jeff Weaver : "client has 5 units. just refinanced 4 and not mention of it. 5th has been approved and they conditioned for it. "
Jason Anker : "yes its a standad part of coverage"
Caroline Roy : "should be part of the standard investment prop HOI coverage in most states"
Jeff Weaver : "when is rent loss insurance required on an investment prop?"
Troy Evans : "REPRICE: 1:48 PM - Franklin American Better"
Matthew Graham : "RTRS - CYPRIOT FINANCE MINISTER SARRIS TELLS REUTERS "NO TRUTH" TO REPORTS OF HIS RESIGNATION "
Matthew Graham : "supply has been relatively absent but picking up today as well."
Andrew Horowitz : "then people remember there are other bonds available"
Andrew Horowitz : "tsy's get the first inflows in flight to safety moves"
Matthew Graham : "MBS are almost always going to lag fast-paced flight-to-safety rallies in TSYs"
Gus Floropoulos : "why the lag on mbs vs tsy's"
Dameon Everhart : "REPRICE: 1:06 PM - Wells Fargo Better"
Brett Boyke : "NICOSIA, Cyprus (AP) -- The governing party in Cyprus has called for a one-day delay in a crucial parliamentary vote on a plan to seize a part of depositors' bank savings.
DISY lawmaker Averof Neophytou argued Tuesday that postponing the vote to Wednesday would give legislators a chance to seek a solution that would prevent "the big dangers our country is facing."
Rob Clark : "REPRICE: 12:17 PM - Provident Funding Better"
Matthew Graham : "CNBC - Cyprus Finance Minister Offers to Resign, Resignation Not Yet Accepted: Source; Ruling Party Abstains from Bank Levy Vote - http://www.cnbc.com/id/100564863"
Jeff Anderson : "Have their been any confirmations anywhere of increased withdrawals from banks?"
Victor Burek : "those might become famous last words"
Matthew Graham : "RTRS - PORTUGAL FINANCE MINISTER SAYS DEPOSIT MEASURE LIKE IN CYPRUS "TOTALLY OUT OF QUESTION" FOR PORTUGAL "
Matthew Graham : "looks like your earlier question was on 3.0 MBS, but in general, I don't spend much time with MBS techs. In terms of Treasuries, we have the post-Italy micro-range boundary at 1.9124, same level I mentioned on Sunday night as the 2nd level of resistance after 1.9465. Taken together, those two levels are sort of a dividing line between "concerned" and "optimistic" for MBS."
Cory Bannerman : "mg- what are your thoughts on longterm trend vs Cyprus and the fmoc today?"
Victor Burek : "totally agree, definitely them to blame and their policies..didnt gus say that 80% make less than 20k and pay no taxes?"
Matthew Graham : "RTRS-SENIOR GERMAN OFFICIAL - SITUATION IN CYPRUS IS BAD, REASONS FOR THIS LIE IN CYPRUS"
Matthew Graham : "yeah, that's not how they see it, though... Funny headlines earlier on that. let me see if I can find"
Victor Burek : "still amazed at how dumb of a move this was by the EU/Germany"
Matthew Graham : "about 2 minutes ago. resignation already submitted"
Victor Burek : "mg, you see any breaking news regarding cyprus fin min resigning?"
Victor Burek : "it should be set to your time zone"
Dez Loessberg : "Is FOMC Eastern time on our calendar? If so, that means rate sheets wont even be out for me before it hits tomorrow..."
Victor Burek : "if stocks sell off again at close, i might float til morning"
Matt Banasiak : "Lock everything in sight today! Tomorrow will be goods news."
Dez Loessberg : "yep, exactly...that's why I was seeing how everyone else felt..."
Victor Burek : "dont get too giddy, tomorrow could be a market mover"
Dez Loessberg : "I learned to lock the ones down I can when I can being on the bad side of tape bombs a couple times now but all this green makes me giddy going into tomorrow :)"
Victor Burek : "but some of those might get locked later today"
Victor Burek : "floating all loans originated after nfp, everything prior to nfp is locked"
Dez Loessberg : "What % of your guys' pipeline is locked going into FOMC tomorrow?"
Gaius Rossini : "so you all will have the FHFA soliciting for you... though they'd likely be directed towards their current servicer"
Gaius Rossini : "We soon will be implementing a nationwide public relations campaign to educate consumers about the HARP program and the eligibility requirements."
Gaius Rossini : "btw for those who didn't read demarco's testimony:"