Bond markets were slightly weaker heading into today's session and extended the weakness by very small steps after the day's meaningful events. The first consideration was the stronger-than-expected Jobless Claims figure. With no "yeah but" from the Labor Department allowing markets to dismiss the result, and with GDP not making any meaningful statement, bond markets logically gave up some ground. The rest of the day saw levels recover somewhat into the Fed's buying operation, weaken again into the 7yr Treasury Auction and then hold ground into the close.
All of this took place inside only a small portion of yesterday's range, decidedly building a case for consolidation. Such moves can be the turning point in rallies or merely a pause before continuing, but next week's NFP likely gives pause to grand aspirations in either direction. Rate sheets were able to hang on to yesterday's gains in most cases despite slightly weaker closing prices in MBS. It feels like we're waiting for something to happen, and the only guaranteed action in that regard is next Friday.
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
First Move is Weaker Following 7yr Auction
10yr yields moved immediately back to the highs of the day, though it's too soon to say if they'll avoid breaking through. MBS are heading back to their lows of the day as well. The negative reprice risk mentioned in the previous alert remains in play, and will increase if we break into weaker territory (sub 101-14 in Fannie 3.5)
Negative Reprice Risk Increasing Slightly; Far From Full-Blown
Depending on when your initial rate sheet came out, the lender in question may be looking at a loss of 1-2 ticks so far (not enough for reprice risk) or 4-5 ticks at the very most (just enough to be entering negative reprice risk territory).
Treasuries are now trending sideways over the past 3 days and there is some concern that 10yr yields bounced at 2.62 yesterday, even if they haven't stampeded quickly higher to yesterday's upper yield limits.
To reiterate comments during the past two days, we've been expecting bond markets to express more of an innate desire to level-off here after Tuesday's rally. 10yr levels are currently exactly in line with Tuesday's post-rally levels (2.646).
This won't necessarily have dire consequences for MBS, but we're just weak enough now that negative reprices are a small risk for a very small group of lenders. Fannie 3.5s are down 6 on the day at 101-17 and Fannie 4.0s are down 3 to 104-20. Fannie 3.5s will now be reflecting as the current coupon upon refreshing the dashboard or initially loading.
Live Chat Featured Comments
Matthew Graham : "AH: http://www.reuters.com/article/2013/09/26/us-jpmorgan-probes-holder-idUSBRE98P0NW20130926"
Matthew Graham : "yes Joon. 4.0s still relevant too."
joon choi : "mg are watching 3.5 now?"
Andrew Haynes : "whats the skinny on JPM this morning?"
Victor Burek : "Santelli gave it a C-"
Matthew Graham : "maybe C- "
Matthew Graham : "D+"
Matthew Graham : "RTRS- U.S. 7-YEAR NOTES BID-TO-COVER RATIO 2.46, NON-COMP BIDS $15.03 MLN "
Matthew Graham : "RTRS - U.S. SELLS $29 BLN 7-YEAR NOTES AT HIGH YIELD 2.058 PCT, AWARDS 9.87 PCT OF BIDS AT HIGH "
Matthew Graham : "2.047 WI"
Rob Clark : "I like this guy. He makes sense."
Matthew Graham : "RTRS- KOCHERLAKOTA - LOW INFLATION SHOWS THERE'S A LOT OF ROOM FOR FED TO PROVIDE MUCH-NEEDED STIMULUS TO JOBS MARKET "
Matthew Graham : "RTRS- FED'S CURRENT OUTLOOK FOR GRADUAL DECLINE IN JOBLESS RATE SHOULD TRIGGER MORE STIMULUS - KOCHERLAKOTA "
Matthew Graham : "RTRS- FED MUST KEEP UP STIMULUS, AND POSSIBLY ADD MORE, EVEN IF INFLATION RISES ABOVE 2-PCT TARGET - KOCHERLAKOTA "
Matthew Graham : "RTRS- FED SHOULD KEEP UP STIMULUS EVEN AS EMPLOYMENT GROWS AND ASSET PRICES RISE UNUSUALLY HIGH - KOCHERLAKOTA "
Matthew Graham : "RTRS- KOCHERLAKOTA - FED MUST USE ALL TOOLS, NO MATTER HOW UNCONVENTIONAL, TO BOOST EMPLOYMENT "
Matthew Graham : "RTRS- KOCHERLAKOTA - FED MUST DO WHATEVER IT TAKES TO RETURN EMPLOYMENT TO MAXIMAL LEVELS AS FAST AS IT CAN "
Clayton Sandy : "they'll do 540 days on their 1,3,5 year ARM"
Eric Franson : "Dont have BB&T data."
Eric Franson : "Indeed. And that's all part of it. - CS I have their data as they are my main investor outside of FNMA and my bank."
Clayton Sandy : "BB&T will go up to 360 lock on a fixed rate with 1/2 up front and 1% add to the rate"
Matt Hodges : "i have one lender going to 540 days"
Clayton Sandy : "BB&T and Wells both have an extended lock programs"
Eric Franson : "Question for the group - anyone offering extended lock terms up to and even past 12 months. Gathering data to present to execs for development at my bank. Email email@example.com. Thanks MG!"