Looking at today's trading activity in MBS in the context of recent movement gives the impression that it was the sideways (but potentially supportive) fizzle that followed more pronounced selling in the last 6 out of 8 sessions. Fannie 4.0s opened up at their weakest levels in over 2 years, though only a few ticks below recent lows. Jobless Claims helped liquidity and positivity come online and modest gains persisted until 10:30am roughly. From there, prices formed a tidy little half-circle, arcing down from 102-06 to 102-00 and back to 102-06 by the end of the day. 10yr yields traded a similar pattern, but in reverse. The risk is that the best levels in both cases didn't break yesterday's worst post-FOMC levels. The hope is that today's lows hearken the establishment of support (Fannie 4.0s continue to close above 102-00!). The wild card is that none of this may matter come next week and the week after.
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 4:07 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 Back Into Positive Territory; No Momentum for Now
Fannie 4.0s have been grinding it out between unchanged levels and a few ticks weaker. But as Treasuries have held their ground with a double bounce at 2.92, moving under 2.90 now, MBS have followed with their own bounce at 102, moving up to 102-03 currently. There's not much going on here, but it does lessen any lingering prospects for negative reprices.
Deteriorating Further; Reprice Risk Increasing
Quick update to the last alert...
While we're not yet into levels that guarantee a majority of lenders would be repricing negatively, things continue to progress in bad directions. 10's are higher still, now up to 2.912 and Fannie 4.0s are down to 102-01. The long we hold here or continue to fall, the more negative reprices become a risk. Conversely, if we were to quickly bounce several ticks higher, we might see few or none.
Treasuries Back in the Red; MBS May Follow; Negative Reprice Risk
10yr yields just moved into negative territory, raiding concerns that MBS may not be far behind. Fannie 4.0s are currently 4 ticks off their highs of the day, right on the edge of negative reprice risk for any lenders out with pricing near those highs. Additionally, lenders are likely to be tentative as levels hover around long term pivot points (102-02 in FN 4.0s). Stay frosty.
Live Chat Featured Comments
Michael Gillani : "If they would allow borrower premium credit to offset other fees but still included lender paid comp, i'd be fine with hat. That way you could get premium credits to cover all other fees and have the up to 3% reserved for comp, on the max end of course"
Brent Borcherding : "AP, from a broker perspective, I am not worried. I find it hard to believe this will not be resolved, everything previously touted as the end of the broker has actually been a benefit, imho. "
Michael Gillani : "For corr and retail, it applies to front end fees but not anything earned on the back through yield or srp"
Tim Y : "mg does that rule also apply to cor lenders?"
Michael Gillani : "It should because the borrower isn't paying the fee if it is being covered with a credit but the question is will it?"
Michael Gillani : "The question is weather locking a rate that offsets third party fees with borrower premium credit will take that part off the 3%"
Andy Pada : "do you feel lenders will pad their premium in rates to take into account other 3rd party fees which would result in higher interest rates to the broker?"
Michael Gillani : "Your rates will be way more competitive because you'll be pricing every deal at .5 pt in yield."
Michael Gillani : "It's not really about the rates being competitive, it's about being able to earn a living with your comp being included with all third party fees and having to remain under 3%"
Andy Pada : "from a broker perspective, is there a concern regarding the 3% rule of QM? If broker compensation is included in the 3%, is there a concern that broker rates will not be competitive?"
Ken Crute : "Andy don't think even the market knows, trying to understand the market today, is like trying to find meaning in a Pauly Shore movie "
Brent Borcherding : "I believe the dilemma is that no one is sure on that, AP, even the market."
Andy Pada : "has the market priced in a) taper, in general, b) taper that continues to increase until asset purchases are finished in 2014; or c) taper based on month to month economic data?"
Tom Schwab : "REPRICE: 12:09 PM - Flagstar Worse"
Brent Borcherding : "Rising rates and increasing inventory....wonder what the result will be."
BoozelB : "How long these large banks start releasing some inventory. Housing is looking much better than it really is."
Bert Swyers : "household income down big, claims up and more to come with the layoffs that have happened and on the way, deflation, I still think we get back under 2.40 this year"
Rob Clark : "REPRICE: 11:48 AM - Provident Funding Worse"
BoozelB : "The 4's are starting to feel like the new old. Next thing you know we'll be on our porch telling stories to our grand kids about the days when rates in the 3's roamed the rate sheets."