MBS Live: MBS Afternoon Market Summary
It takes some measure of bravery to bet big rates moving significantly lower or higher from current levels when the rest of the market is so decidedly sideways.  It would take a similar amount of stupidity to put oneself in a position to be too deep into the wrong side of the trade heading in to next week's FOMC Announcement/Events.  While there tends to be always a bit of bravery in the market when trading levels are sideways, stupidity is much rarer.  That's now painfully evident looking back on the week, considering trading levels never rose above or fell below the boundaries immediately surround the NFP trade a week ago today. 

If the collective level of bravery or stupidity was high enough, the next major technical levels on either side of this central range are all the way up at 3.08% in 10yr yields or all the way down to 2.74.  From 2.89, that's a lot to ask.  Might we have seen more conviction if the economic data was more convicted?  Possibly, but it would have to have shown up right after the data.  After trading levels bounced again at 10am, the day was essentially over, and next week's FOMC was that much more unobstructed on the horizon.

The MBS version of this central perch is Fannie 4.0s at 102-22 with the boundaries near 102-00 and 103-16. Bottom line, although volume was low overall, it was healthy around the data releases.  The fact that ranges stayed as contained as they did lets us know just how unsafe it seems to risk being on the wrong side of next week's trade.  To reiterate a previous point, it's not so much about the numbers that may or may not accompany a tapering announcement, but rather about "everything else," including the forward guidance in the Announcement as well as details of Bernanke's press conference.  Whether the Fed tapers or not, we're set to get our next major evolution in Fed policy (because even if they did nothing--though unlikely--that would be extraordinarily significant).
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
94-16 : +0-04
FNMA 3.5
98-29 : +0-05
FNMA 4.0
102-19 : +0-04
FNMA 4.5
105-16 : +0-05
GNMA 3.0
95-05 : +0-03
GNMA 3.5
99-28 : +0-06
GNMA 4.0
103-13 : +0-05
GNMA 4.5
106-09 : +0-04
94-04 : +0-04
98-19 : +0-05
102-11 : +0-05
105-04 : +0-05
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 this afternoon.

3:01PM  :  ALERT ISSUED: Negative Reprice Risk Not Justified, but Prices at Afternoon Lows
MBS are off 4 ticks peak to trough, which is a move that normally prompts at least a "heads-up" alert. So here it is, but take it with a grain of salt.

Fannie 4.0s are up 3 ticks on the day at 102-18, down from previous highs of 102-22. Compared to the prices in force when rate sheets came out, negative reprices aren't likely, but they are beginning to be an outside possibility for one or two lenders. Most will recognize and appreciate the fact that not much is going on in bond markets this afternoon and anyone that had urgent trading business to attend to, did so before 2pm, if not sooner.

It's entirely possible that we simply drift sideways from here and see no reprices, but we can't rule out the risk with 100% certainty. If you were planning on locking today anyway, now's as good a time as there will be. If you were planning on floating over the weekend if prices were stable, this isn't a big enough move to make you change your mind.
1:18PM  :  Bond Markets on Auto-Pilot Into PM
After spending the entire week consolidating between highs and lows set on a single day a week ago, MBS and Treasuries are now consolidating between the highs and lows of the first 2 hours of trading today, and continue to hold those into the afternoon.

This has made for a narrower and narrower range with Fannie 4.0s grinding increasingly against 102-22 and 10yr yields hanging out between 2.9 and 2.89 for the past hour (2.88 before that).

As noted in the MBS-MID DAY, we may see some move outside the consolidative range as we progress into the afternoon, but it would be inconsequential compared to the first 4 hours of the day, and the entirety of the 4 days before that. ALL of those point to a massive sideways consolidation ahead of next week's FOMC. All you can do at this point in the day is keep an eye out for alerts or rapid price changes, and remember the lenders that are prone to pipeline control reprices if you've had the pleasure of receiving one on a Friday afternoon when MBS are up.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Lynn ONeal  :  "as long as the value is the and the appraiser agrees you should be ok"
Lynn ONeal  :  "I just closed one with no appliances"
Caroline Roy  :  "no, just says that it appears to be at the end of its functional life"
Jason York  :  "i think VB will be correct, who knows that they won't just take the insurance money and spend it on something else? Not saying they will, but that will be the arguement"
Victor Burek  :  "is appraisal marked subject to?"
Victor Burek  :  "I think you are going to have to wait"
Caroline Roy  :  "just got an appraisal noting that the roof is toast. they have a pending hail claim and the insurance is replacing the roof. Do you think we can close this w/o replacing the roof since there is a claim in process to get it fixed? this is a refi"
Clayton Sandy  :  "Andrew, If the loan can be sold to Fannie/Freddie or insured/guaranteed by FHA/VA/USDA, it will be considered a QM"
Andrew Russell  :  "so lets get this straight, what does QM affect? Which loans? Since the GSE loans make up like 98.467% of what is originated right now"
Victor Burek  :  "I agree, only locking clients closing in less than 2 weeks"
Andy Pada  :  "some how I feel like I was talking about 102-22 three years ago."
Andy Pada  :  "there you go PM"
Jeff Anderson  :  "#8, PM. C'mon, let's crack the ceiling."
Clayton Sandy  :  "Until Fannie/Freddie reduce their max DTI, any loan that can be bought via secondary market is exempt from the 43%"
philip mancuso  :  "102 21 for a 7th time in 2 days"

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