Almost all day long, markets did almost nothing, almost... Bond markets coped with an adjustment lower in price/higher in yield heading into the domestic session owing to some overnight positivity (or lack of sufficient negativity) surrounding the Cyprus situation. Despite a bit of weakness overnight, volumes were small and the ranges stayed remarkably contained during US trading. This continued to be the case right through the FOMC Announcement, Forecast, and even in the immediate wake of Bernanke's press conference. Before and after the 3pm Treasury close, accounts began pulling up stake in Treasuries. Heading into the 3pm mark, this was actually stable-to-positive as it benefited from short-covering. After 3pm, the tone abruptly shifted and 10's moved just over 2bps higher fairly quickly and in decreasing volume. MBS simply followed suit with Fannie 3.0s ultimately giving up three eighths of a point by 3:40pm, prompting most lenders to reprice negatively.
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
Reprices Incrementally More Possible
MBS have just now made it to price gaps vs rate sheet times that suggest negative reprices. Fannie 3.0s are down 12 ticks at 102-23 and 10yr yields are just outside their highs of the day at 1.9511. Widespread reprices aren't "likely" at these levels, but they're increasingly possible. This is the first real "alert" of the day.
MBS Hit Lows Again After Bullish Hints From Bernanke
It was pretty subtle, but when asked if there was a chance that 2013 would be a repeat of the false starts seen in 2011 and 2012, Bernanke said that the reasons for those distortions are less of a factor in 2013. If we stretch our imagination, that's somewhat of an economically bullish suggestion.
Whether it was due to those headlines or simple tradeflow considerations, bond markets are back to their weakest levels of the day with MBS leading the charge, currently down 8 ticks at 102-27. The gap between rate sheet print times and current levels CONTINUES to fall short of suggesting negative reprices, but the shape of the charts could be a moderate concern for some quicker-to-reprice lenders.
To reiterate and reemphasize, negative reprices aren't likely, but a small minority of lenders could be starting to consider them. 10's look like they're breaking out of their post-FOMC supports, so risks in MBS would soon be increasing if we hit 102-25 and below.
Range Containment Continues Post-FOMC
Just an update for inquiring minds... Neither MBS, Treasuries, or stocks have broken their pre-FOMC ranges. MBS fell very briefly back toward their weakest levels and bond markets remain closer to weakness than strength. MBS at 102-29 in Fannie 3.0s. 10yr Yields at 1.9459. Woefully uneventful so far, but again, a bit more cautious vs optimistic as far as trading levels are concerned--all under the caveat that previous lows have yet to break.
MBS Hit Lows Ahead Of FOMC, But Trend Is Sideways
Despite the fact that MBS have hit their lowest levels of the session roughly 10 minutes before the FOMC party kicks off, the broader trends in bond markets and equities remains more sideways than "weak." We just happen to be on the far edge of sideways.
This doesn't mean that negative reprices are an impossibility. In fact, with a gap of 5 ticks between highs and lows, it's possible, but most lenders put out rate sheets when prices were only 2-3 ticks higher, if that. As such, any negative reprices would be emotional decisions based on the steady move from highs to lows since noon. Most will likely wait for any post-FOMC volatility to make itself apparent.
Fannie 3.0s are currently down 7 ticks at 102-28 and 10yr yileds are up 4bps on the day at 1.9442. Stocks are flat after opening up roughly 10 points higher in the S&P.
Live Chat Featured Comments
Ted Rood : "Frankly, can't imagine positioning myself as a mortgage professional without access to a top notch bond tracking service."
Matt Hodges : "i locked two - very helpful service"
Steve Chizmadia : "Squeezed 3 locks in before that one. Much appreciated on the alert MG"
Steve Chizmadia : "REPRICE: 3:56 PM - Pinnacle Worse"
Sloan Davis : "REPRICE: 3:55 PM - Sierra Pacific Worse"
Bryan LaFlamme : "REPRICE: 3:47 PM - 360 Mortgage Worse"
Andrew Horowitz : "Russia saying no to Cyprus request to renegotiate existing loan or add additional loans per CNBC"
Matthew Graham : "not overtly, but through the removal of the previous text: "Although strains in global financial markets have eased somewhat, ""
Matthew Graham : "looks like Europe was secretly mentioned in the statement"
Scott Rieke : "the setup was already in place and this was a non-event. No back to Europe"
Oliver S. Orlicki : "would be nice as a new ceiling"
Oliver S. Orlicki : "hope we hold 1.95"
Jeff Anderson : "I'm happy we're where we are. Were down at 1.94 due to Europe, so the Fed not doing any damage is a win to me today."
Matthew Graham : "RTRS- FED SEES LONG-RUN JOBLESS RATE AT 5.2 PCT TO 6.0 PCT (PVS 5.2 TO 6.0 PCT); GDP GROWTH AT +2.3 TO +2.5 PCT (PVS +2.3 TO +2.5 PCT) "
Matthew Graham : "RTRS- FED CUTS FORECAST FOR 2013 GDP GROWTH, CUTS FORECAST FOR 2013 UNEMPLOYMENT RATE, CUTS FORECAST FOR 2013 CORE INFLATION "
Matthew Graham : "RTRS- FED SAYS 13 OFFICIALS WOULD PREFER FIRST RATE HIKE IN 2015 (PREVIOUS 13); 1 IN 2016 (PVS 1) "
Matthew Graham : "RTRS - FED REPEATS TO KEEP FED FUNDS 0-0.25 PCT AS LONG AS JOBLESS RATE ABOVE 6.5 PCT, 1-2 YEAR PROJECTED INFLATION NO MORE THAN 2.5 PCT, LONGER-TERM INFLATION EXPECTATIONS WELL ANCHORED "
Matthew Graham : "RTRS - FED REPEATS EXPECTS HIGHLY ACCOMMODATIVE POLICY WILL REMAIN APPROPRIATE FOR CONSIDERABLE TIME AFTER ASSET PURCHASE PROGRAM ENDS AND ECONOMY STRENGTHENS "
Matthew Graham : "RTRS- FED SAYS INFLATION RUNNING SOMEWHAT BELOW LONG RUN OBJECTIVE APART FROM TEMPORARY VARIATIONS DUE LARGELY TO ENERGY"
Matthew Graham : "RTRS - FED SAYS LABOR MARKET CONDITIONS SHOW SIGNS OF IMPROVEMENT, BUT JOBLESS RATE REMAINS ELEVATED "
Matthew Graham : "RTRS - FED REPEATS WILL CONTINUE ASSET PURCHASES UNTIL LABOR MARKET OUTLOOK IMPROVES SUBSTANTIALLY "
Matthew Graham : "RTRS- FED REPEATS WILL BUY LONGER-TERM TREASURY SECURITIES AT PACE OF $45 BLN A MONTH, AGENCY MBS AT $40 BLN A MONTH "
Matthew Graham : "RTRS- BANKS IN CYPRUS TO REMAIN CLOSED THURSDAY AND FRIDAY - GOVT OFFICIAL "
Chris Kopec : "Cyprus bank holiday extended to next Tuesday. I believe that's when Whimpy pays for his hamburger."
Rob Clark : "REPRICE: 12:06 PM - Provident Funding Better"
Matthew Graham : "you see this last night BB? http://www.reuters.com/article/2013/03/20/us-banking-cyprus-idUSBRE92J00K20130320"
Matthew Graham : ""fixed" as in "maybe possibly not spiraling toward oblivion, but still quite unpleasant and an overall drag on the global economy.""
Andrew Horowitz : "fixed all better sarcastically stated"
Matthew Graham : "would probably change the R to a C though, then we're talkin"
Andrew Horowitz : "Ireland is off the radar"
Matthew Graham : "best I can tell, Ireland was the first "big deal" in the EU, based on spread dynamics, and they've been on the up and up ever since, despite having a crappy, almost zero-growth economy with 15% u/e"
Brent Borcherding : "Ireland?"
Matthew Graham : "right, but with which countries next in line? Cyprus can't readily be extrapolated to Italy or Spain"
Andrew Horowitz : "kinda like the sequester having minimal effect so everyone seems to have forgotten about it already"
Andrew Horowitz : "test case to see how the market reacts "
Matthew Graham : "test case for whom?"
Brent Borcherding : "I agree, AH....beginning of the end."
Andrew Horowitz : "conspiracy theorist in me says the EU is looking at the possible exit of Cyprus as a "test case" and cue Vic"
Brent Borcherding : "How does the idea that they may selectively decide which members of the EU stay and which go moving forward won't lead to greater instability?"