Today's commentary began with the observation that yesterday seemed more like the culmination of an auction cycle than the middle of one. Today's trading confirms that, first with the completely inoffensive "B+" auction results and then with the post-auction weakness. In other words, yesterday was a big day in terms of "supply," with more than $100 bln of Treasuries and Verizon bonds leaving a veritable black hole of funding needs between the government and the giant telecom. Although we hadn't worked through the whole hole by yesterday, it was enough to render today more of an afterthought.
After the uneventful auction results, bond markets subsequently were unable to get excited about making any further progress. Trading levels were in position to capitalize on another strong result, but without it, simply moved back to Wednesday afternoon's. Bottom line: it only took 2 out of 3 auctions + Verizon's deal for traders to know where they wanted to be. We might have extended gains a bit had more buying emerged after the auction, but it didn't, so we retreated higher in yield. MBS kept good pace withe the move and now it's as if today never even happened, with levels returning to yesterday's latest.
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 4:08 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
Negative Reprice Risk Incrementally Higher
This alert simply turns up the dial on the urgency of the last alert that said only a few of the "early crowd" lenders might be getting antsy. Prices have fallen another few ticks and enough to being a few more lenders into reprice risk territory.
Fannie 4.0s are now unchanged on the day at 102-14 and 10yr yields are flat on the day at 2.9085
Negative Reprice Risk May be Increasing
After the uneventful reaction to the 30yr Treasury Auction, bond markets weren't able to make any meaningful progress. This ended up looking more like "resistance" when viewed in relation to this morning's highs and we're now making a quick (but still small) swing in the other direction.
Fannie 4.0s are 4 ticks off the highest levels seen during rate sheet print times, thus right on the leading edge of negative reprice risk. We'd emphasize that this is a very early warning for most lenders, and it's possible we see no reprices if we bounce quickly. If we don't, a few of those "early crowd" lenders could be getting antsy.
Live Chat Featured Comments
Rob Clark : "REPRICE: 2:49 PM - Provident Funding Worse"
Matthew Graham : "PM, the 3 and the 10 go how they go and the expectations for the 30 are already baked-in in real time. Because of the moving-target nature of the WI, how the auction goes vs expectations automatically adapts to the past two days of trading. The short term weakness in the past hour isn't uncommon, by way of "auction concession." Nothing too weird going on here, and as I said, markets did a great job of predicting where we'd be right now"
John Tassios : "Phillip, there is usually last minute price concsessions into 10 yr and 30 yr auctions"
Victor Burek : "Santelli gave it B+"
philip mancuso : "I know a few ticks isn't a big deal, but why there was pressure going into the auction is beyond me. when was the last time was had two previous auctions as strong as the 3 and 10 were. to think the 30 would go differently is kinda stupid imho. I was long for that reason"
Matthew Graham : "B+ auction "
Matthew Graham : "The rally engaged yesterday, and markets did a great job of pricing this one in"
Jeff Anderson : "Supply over rally.....engage."
Matthew Graham : "RTRS- US TREASURY - PRIMARY DEALERS TAKE $5.42 BLN OF 29-YEAR 11-MONTH BONDS SALE, INDIRECT $4.90 BLN "
Matthew Graham : "RTRS- U.S. 29-year 11-month bond BID-TO-COVER RATIO 2.40, NON-COMP BIDS $6.31 MLN "
Matthew Graham : "RTRS- U.S. SELLS $13 BLN 29-YEAR 11-MONTH BONDS AT HIGH YIELD 3.820 PCT, AWARDS 58.87 PCT OF BIDS AT HIGH "
Matthew Graham : "so if this holds with yesterday's trend, we're looking for at least 2.47 to be strong"
Matthew Graham : "Last BTC was 2.11, then 2.26 before that. 2.47 before June FOMC."
Chip Harris : "I saw that yeaserday, Loiie. Just surprised that no one else is having issues."
Louie Colatriano : "CH: Adam Q. from Thomson Reuters wrote, regarding his comment about slow purchase times at Nationstar, "Nationstar feedback received. Delayed PA wires stem from technology upgrade at Nationstar. New system delivery in 30-60 days. Nationstar also has a new custodian (Deutsche Bank). That could certainly create extra stips for sellers. Growing pains!""
Matthew Graham : "MBS could tighten, probably a lot, but whether or not it translated to meaningful improvements in rates is less certain. Probably it would a bit, but not as much as the average MBS devotee would like."
Matthew Graham : "Depends on definition of "massive," the total amount of reduction, the statement that accompanies it, Bernanke's presser, etc..."
Chip Harris : "Anyone else having funding issues with Nationstar? I am being told that they are having IT issues with their wires. Have a purchase from yesterday that has still not funded and all parties are so irate. I am getting nothing from anyone at Nationstar. If it's really a systemwide issue as my AE says it is, I am surprised there is no talk on here."
Edgar : "MG-When the Jackson Hole meeting was taking place and an economist put forth the idea that the FED should leave MBS alone until the Fed is done with buying treasuries. If the Fed announces next week that MBS will be untouched/buying will keep at the same pace for a long time do you think we see a massive rally in MBS? "