Bond markets continued free-falling today, ostensibly searching for the theoretical point at which a September 18th reduction in the Fed's asset purchases will be fully priced in. Factor in the ongoing debate over the next Fed Chair and the seasonal participation patterns resulting in very light relative volume/liquidity and you have all the ingredients needed for a double batch of pain--or "pain trade" as the case may be. The current version of the pain trade is where no one wants to be the first to claim that all the bearish events (September tapering, Summers nomination) have been priced-in. The path of least resistance is for stocks and bonds to turn into mattress-cash simultaneously, and to keep doing that until they have reason to stop. At first, this was EVENT-driven in the case of last Thursday's economic data (and to a lesser extent, on Friday's data and afternoon Fed Chair musings discussing a higher likelihood of Summers vs Yellen). Now it's just leftover momentum preserving the legacy. More market participants and more conviction would create friction if either of those things were present, but they're not, so...
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 4:03 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
Selling Intensifies; Negative Reprices Highly Likely
Just to reemphasize the previous alert, reprices are even more likely now. Although most lenders were out with prices at what were the lows of the day, those lows are now lower. Fannie 4.0s are down 20 ticks at 102-00, and getting less liquid by the minute. 10yr yields are at multi-year highs of 2.886. At these levels, all lenders are at risk for negative reprices.
MBS and Treasuries fall to worst levels of the day
The Fannie Mae 4.0 coupon just broke to its lowest level at 102-08. This is only a few ticks below where most lenders issued rates but early morning lenders might be in position to reprice for the worse.
Live Chat Featured Comments
lhefner : "REPRICE: 1:20 PM - 360 Mortgage Worse"
lhefner : "REPRICE: 1:12 PM - Quicken Loans Wholesale Worse"
lhefner : "REPRICE: 1:12 PM - Flagstar Worse"
Edgar : "In the small community I have of lenders, LOs, escrow agents and realtors is that volume is off 60-80% compared to pre-May/June. All our lenders are 1 day or less on everything. "
Rob Clark : "Their second on 30 year fixed"
Rob Clark : "REPRICE: 1:10 PM - Provident Funding Worse"
Morgan Hammer : "Yeah Philip all the reps I have spoke to are saying that purchase volume is noticeably down. "
Brent Borcherding : "I talked to a couple of escrow regional managers, end of last week, and they shared the same PM. Refis were expected to drop, but they weren't expecting the significant slowing in purchases over the last 30 days."
Jeff Anderson : "The date from the rise in rates hasn't really hit the econ reports, or is just starting to. We'll see what happens now to the end of Sept, imo. S/b interesting."
philip mancuso : "I think the "experts" really are missing the boat on this rate issue. talked to a few wholesale reps today who said even their purchase is way down."
Gus Floropoulos : "REPRICE: 1:04 PM - PHH Worse"
Eric Franson : "REPRICE: 1:03 PM - Wells Fargo Worse"
Carlos Danger : "REPRICE: 12:51 PM - Quicken Loans Wholesale Worse"
Nash : "REPRICE: 12:50 PM - Franklin American Worse"
Nate Miller : "REPRICE: 12:45 PM - Caliber Funding Worse"
Jerrod Nash : "REPRICE: 12:45 PM - BB&T Worse"
Jerrod Nash : "REPRICE: 12:44 PM - Chase Worse"
Chip Harris : "Mine are all the same as Justin's for Fannie. If I have that issue, I always make sure the credi treport that I submit with the loan package shows the balance and the payment that I need it to show."
Justin Harward : "JM, my underwriters would require the balances be paid off and the accounts closed to exclude them"
Justin Harward : "REPRICE: 12:40 PM - Great Western Bank Worse"
Matthew Graham : "Inflection point is a price level or a small zone of levels where prices are more likely to bounce vs break. Prices approaching and inflection point from either side are akin to throwing a positively charged magnet at a piece of metal with a positive magnetic charge."
Joe Moran : "question for those here. I have a borrower that paid off a bunch of credit cards right after I pulled the credit report and i even updated the report before turning the file in. u/w of course now has to include the payments in the dti. i cannot find anywhere in the guidelines where it says the balances have to be zero for a certain amount of time to not include the payments. anyone know the answer to this?"
Amitab Mukerjee : "MG: What is an inflection point. I assume, where people scurry for the exits?"
Edgar : "don't hate me MND community but I'm pulling for a break above 2.9 today and 3.0 before the end of the week. I'm in the "lets get this over with crowd""
Matthew Graham : "2.912 to 2.96 was an inflection point in the 2010 sell-off"
Tony Cardinal : "resistance is futile"
William Hansen : "There is no resistance. "
Charles Tadros : "REPRICE: 12:32 PM - Provident Funding Worse"
Chris Kopec : "Where is the next level of resistance?"