MBS Live: MBS Afternoon Market Summary
Bond markets began pouting even before they were open, according to movement in Treasury futures during yesterday's bond market closure.  The negativity remained in place overnight and continued to pervade Tuesday's session.  The initial culprit was yesterday's increasingly convincing buzz regarding a potential Senate-drafted deal to fund the government through 2014.  Granted, there have been plenty of headlines on the topic of a "potential deal," but yesterday's had the winning combination of being closer to the debt-ceiling deadline, drafted in the Senate, and having the support of Senator McConnell.  While McConnell isn't in charge of the Senate and can't force House Republicans to do his bidding, his involvement in such matters in the past has marked a turning point with progress not far behind.

At several points in today's session, it looked as if further progress would be made.  This kept the pressure on bond markets for almost the entire session.  At one point, a breakdown in talks among both chambers of congress looked as if it would help MBS claw back some of their losses.  In fact, it did accomplish such a thing, but only for a short while, ultimately resulting in a sideways slide out the door.  And that's the thesis above all else: trading levels for MBS and Treasuries are almost perfectly in line with those that marked the inception of their post holiday trading.  Interestingly enough, the 10yr yields implied by the initial sell-off in futures on Monday are exactly the same as today's actual closing yields.
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
96-19 : -0-11
FNMA 3.5
100-28 : -0-08
FNMA 4.0
104-07 : -0-04
FNMA 4.5
106-16 : -0-02
GNMA 3.0
97-15 : -0-12
GNMA 3.5
101-26 : -0-09
GNMA 4.0
104-26 : -0-03
GNMA 4.5
107-04 : -0-02
96-07 : -0-10
100-18 : -0-08
103-27 : -0-06
106-05 : -0-03
Pricing as of 4:06 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.

2:46PM  :  Bond Markets Bounce Back as Fiscal Talks Break Down
Reprice risk is ebbing after progress stalled on today's potential debt-ceiling/government funding plans in both the House and Senate. CNBC is reporting some GOP members want Boehner's counterproposal to be even tougher with respect to adding conditions to any deal that funds the government into 2014. Earlier today, the postponement of the medical device tax was the most notable such condition.

Around the same time, Senator Durbin said that Negotiations in the Senate were on hold until the the House works out a plan to proceed. Taken together, these developments suggest we won't see a debt deal today. Given that a potential deal fueled selling pressure for bond markets, some of that pressure is now being unwound.

Fannie 3.5s are back up to 100-31 after falling as low as 100-26 previously. This alleviates much of the preexisting reprice risk IF prices maintain these levels. With the potential for additional headlines out of Washington, that's not necessarily a safe bet. The best conclusion is that this move puts an end to today's bout of ongoing selling pressure that had been in force since 10am. Whether or not the pressure is reversed remains to be seen.
11:23AM  :  ALERT ISSUED: Bond Markets Weaken After Fiscal Headlines; Negative Reprice Risk Increasing
After leveling-off into the 10am hour, MBS and Treasuries have been slipping back toward their worst levels of the morning. Most recently, headlines from Speaker Boehner indicating the House would potentially have some form of debt deal as early as today are contributing to the weakness.

Fannie 3.5s are down a quarter of a point on the day again at 100-29--enough to suggest some negative reprice risk for most lenders (though not enough to unequivocally guarantee a majority will reprice). 10yr yields are up to 2.724 and stock prices joined in the move higher, further suggesting the debt-ceiling headlines are the primary consideration.
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.

Ira Selwin  :  "my question regarding AUS and QM comes from this line: "The consumer could attempt to show that the loan is not a QM (for example, under the General QM definition that the DTI ratio was miscalculated and exceeds 43 percent), and therefore is not presumed to comply with the ATR requirements." Can a borrower claim you calculated too much income?"
Ira Selwin  :  "For a temporary, transitional period, certain loans that are eligible for sale or guarantee by a government-sponsored enterprise (GSE) – the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) – or are eligible under specified federal agencies’ guarantee or insurance programs will be considered Qualified Mortgages under a temporary definition. The loans must meet certain QM restrictions on loan features and points and fees, but they are "
Ira Selwin  :  "http://files.consumerfinance.gov/f/201308_cfpb_atr-qm-implementation-guide_final.pdf"
Ira Selwin  :  "Until a borrower and lawyer challenge that you calculated the income wrong."
Clayton Sandy  :  "So if they have a 49% or a 47% back end and you still get an approval, you are fine."
Clayton Sandy  :  "The QM starts in January, but as long as Fannie/Freddie will take it through DU/LP, you are protected"
Jason Harris  :  "I will be interested to see if that holds....my guess is they back it down at some point....to big a disparity"
joon choi  :  "jan 2014"
Patrick McCarroll  :  "Jan 10th"
Morgan Hammer  :  "when does the 43% Freddie/Fannie rules go into effect?"
Andrew Russell  :  "no rent verification, etc, and now FHA will get all the biz with over a 43 back end since they go to 56.9% back end"
Patrick McCarroll  :  "AKA DTI over 43%"
Patrick McCarroll  :  "They also claim they do not expect an increase in FHA purchase business when Fannie and Freddie both state they will not purchase loans that do no meet QM standards"
Patrick McCarroll  :  "isn't the 43% in the 4155 as a max DTI?"
Patrick McCarroll  :  "HUD truly is full of humor. Have you read their QM proposal? They choose not to adapt the CFPB's 43% ratio max as it would neglect underserved borrowers yet isn'"
Christopher Stevens  :  "Sen. Reid saying agencies could downgrade us as soon as tonight. Is that a scare tactic?"
John Toepfer  :  "https://www.youtube.com/watch?feature=player_embedded&v=0Jd-iaYLO1A"
John Toepfer  :  "video of HR 368"

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