Bond markets are in a bit of a predicament now, at least from a technical perspective. The longer-term uptrend stretching back to the middle of last year has been fairly regular in providing support and resistance on the major swings during that time. Last week's aggressive move challenged the lower end of it with the break through the mid 1.7's (in terms of 10yr yields). Yesterday would have been a great show of sideways support if 10's would have held something even remotely close to 1.75+ as it looked like they might, but no... We got no love for the sideways breakout today and instead continue to trend regularly higher in rate since mid-Friday. In and of itself, that's no biggie after the awesomeness of last week's gains, but in the big picture, it's starting to look like a "failed test" to break out of the long term trend higher in rates. The boundary is around 1.75 currently and will be around 1.76 next week. If we don't break convincingly lower soon, this failed breakout scenario will look increasingly likely. Crossing higher over 1.84 would make this even more likely.
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 4:04 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
MBS Hit New Lows. Negative Reprice Risk Increasing
The 2pm hour has been unkind to both Treasuries and MBS, each hitting their weakest levels of the day. Fannie 3.0s are down 8 ticks to 103-17, which could put some lenders at risk for negative reprices, though the range is narrow enough that other lenders released rate sheets when prices were in similar territory. 10's are up 4.8 bps at 1.80 at the moment and stocks are near their highs of the day.
10yr Auction Preview
We've managed to hold sideways in Treasuries following the spike into 11:30am, but definitely saw resistance to the idea of moving back below 1.784. The auction coming up at 1pm should suggest either a move back below that pivot point or above the earlier highs.
10yr Auctions have been mixed recently with half of the last 10 instances being stronger than expected, half weaker. Today's is a "reopening" which tend to perform better in terms of awarded yield and bid-to-cover. The current when-issued yield (like the consensus for where the auction's high yield will be) is 1.791.
Recent average bid-to-cover has been just over 3.0 for reopenings and just under 2.7 for refundings. Indirect bidders have averaged around 35% of the takedown, but took 47.7% last time.
Treasury auction jargon refresher HERE.
MBS Pushed Back To Lows By TSY Weakness. Holding Now
A larger than average dose of morning volatility is still in the process of shaking out. After hitting morning lows just after 9am, MBS have managed to avoid breaking into new lows since then, but have been right on the edge over the past few minutes.
Treasuries definitely made new price lows (or highs in terms of yield), after a quick technical break of 1.784 that had held up between 10am and 11am. 10's made it as high as 1.798 but have eased just slightly to 1.791. Short covering looks to be in play (or profit taking on tactical shorts taken out after NFP). This casts the bounce back from 1.798 in question and we'd be very wary about assuming any positive reentry under 1.784 until after the auction (that's assuming the auction goes well).
Things have certainly slowed down on the approach to the 1pm auction, and 10's have a bit of room to either add a further concession (higher in yield to one of several technical levels in the low 1.8's), or move back to 1.784 in an attempt to front-run a positive result.
Live Chat Featured Comments
Clayton Sandy : "Exactly. DU doesn't know if it was 4/1 or 4/30 for the BK. Just had one like this with a short sale. "
Alan Craft : "I think you would get approval if you run it in MAy"
Chip Harris : "OK. Thanks, AC and JY. April 2011 - April 2013 = 24 months though. Does it need to be over 24 months?"
Jason York : "yes, you will probably have approval next month"
Chip Harris : "Guessing I need to find someone who will manually UW it?"
Chip Harris : "Hmm. DU giving me a refer for BK showing as 4/11 on credit."
Victor Burek : "santelli says c+"
Matthew Graham : "I'd say it's a C, but with the caveat that it's good to see a C in the 1.7's after months spent over 1.84."
Matthew Graham : "serviceable results... C+/B-. Santelli will think it's better than it is because he usually doesn't distinguish reopenings vs refundings, so he may lean into the "B" territory."
Matthew Graham : "RTRS - U.S. 9-YR 10-MO NOTES BID-TO-COVER RATIO 2.79, NON-COMP BIDS $8.61 MLN "
Matthew Graham : "RTRS - U.S. SELLS $21 BLN 9-YR 10-MO NOTES AT HIGH YIELD 1.795 PCT, AWARDS 54.31 PCT OF BIDS AT HIGH "
Joe Daquino : "Because DU/LP is being stingy and not giving an approve/eligible or the LTV exceeds 95% and borrower doesn't have the funds to pay down......a lot of reasons in my mind. FICO doesn't mean everything in this world. "
Chip Harris : "Why woudl you do FHA with a FICO over 700 when you can get much lower MI through FNMA?"
Clayton Sandy : "I avoid FHA like the plague "
Troy Evans : "I advise a FNMA loan over an FHA if a borrower can qualify for both. FHA is no longer a good option IF the borrower can qualify for both"
Clayton Sandy : "FNMA will do those loans. Anything over 700 I take conventional with 5% or 3% down"
Christopher Stevens : "RK- FHA has improved the qiuality of loans. My avg credit score for FHA is now over 700. these are quality loans that FNMA should be doing. How does increasing MI improve loan quality?"
Ryan Kelly : "CS and TE, but if FHA wants to improve loan quality they need to stop positioning themselves to only get the bottom of the barrel"
Troy Evans : "CS, I agree with you, however if they really are bleeding money, I'd rather an FHA borrower pay for it rather than tax payers"
Christopher Stevens : "I am so sick of hearing about the losses FHA is taking. These are form loans taken years ago not from recent loans with increased MI. Increasing the MI more on FHA is not going to do anything but hurt the very people they want to help...homebuyers"
Ryan Kelly : "How come no one is addressing title insurance? That is definetly a racket"
Christopher Stevens : "wow these congressmen really want the playing field leveled off for Private Mortage Insurance"
Christopher Stevens : "he also wants them to charge the maximum premium allowable by law starting now"
Christopher Stevens : "so he wants to just shut down the mortgage market?"
Christopher Stevens : "Congressman Stivers thinks there should be income limits on FHA "
Victor Burek : "1.75"
Ray Leone : "what is the upfront MIP on a streamline FHA refi?"
Matthew Graham : "pictures always help right? Here's everything I was just talking about: http://tinyurl.com/czbn7rl"
Matthew Graham : "next "major" resistance, but first 1.807 and 1.817. Also, I'd think of 1.83 more like a 1.84 today. That's where the moving average is and a longer term trendline."