MBS and Treasuries diverged again today. This road more-traveled for MBS has several sources of justification and explanation, but it's really the combination that's resulting in such disparate paths. The factors include a distinct lack of interest from anyone other than the Fed. This, in itself, is at least partially a factor of the impending 'year-end' time frame where market participants tend to favor shorter duration and the least risky fixed-income investments.
There are also the more immediate and more overt calendar items to consider. Namely, we have substantial glut of important data tomorrow that begins sketching out the prologue to Friday's NFP story. As we've increasingly seen in this era of horse-trading Fed QE expectations, a "lead-off" can begin to take shape heading into NFP Fridays. In this case, that's already begun to some extent with the balance of yesterday and today's trading resulting in higher rates across the board, and especially in mortgage markets. Tomorrow has the power to accelerate that trend (especially due to ADP Employment in the morning) or to mitigate it ahead of Friday's final verdict.
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 4:05 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
Weakness Becoming Incrementally More Serious, Still not Full-Blown
Fannie 4.0s have shed a few more ticks and are now down 2 on the day at 103-29. Fannie 3.5s are down 1 at 100-10. Both are the lowest levels of the day and both speak to the incrementally increased possibility of negative reprices. The losses still aren't enough to bring all lenders in to the mix, but a few are likely at this point.
MBS Back to Lows; Reprice Outlook Shifting
The reprice outlook is shifting negatively once again, though remains far from full-blown. Fannie 4.0s are back to their lows of the session, still up 1 tick on the day at 103-31. Fannie 3.5s are still up 1 tick as well, but 7 ticks off earlier highs (101-11 vs 101-18). Some lenders may consider negative reprices at these levels, but increasingly so if we move and hold lower. That's yet to be determined as these are the same lows seen this morning. Bottom line: slight risk for some lenders, but most probably won't reprice unless we lose a bit more ground.
MBS Alert - MBS Holding Ground
MBS and Treasuries have both managed to crawl back from their lows of the day and are holding ground. Reprice risk has diminished as we are near opening levels.
Live Chat Featured Comments
Matthew Graham : "No buyers apart from the Fed. Year-end is a factor as well. With MBS hitting their strongest recent spreads in late november, and with year-end (read: less interested in fixed-income duration and risk) on the horizon, there has been a concerted move back in the other direction (now underperforming vs outperforming for the previous 3 months), and thin liquidity has served to accelerate the divergence. Add to that the current week/month's considerations that would be relevant regardless of all"
Chip Hooker : "anyone know why MBS are selling off when 10 year is still in the green consistently for the day?"
Victor Burek : "everyone thought we would see tapering in Sept, but now nobody sees it in December...maybe they will in Dec."
Nate Miller : "i think they actually adjust for the seasonal jobs "
Jeff Anderson : "I'd still think March for tapering, at the earliest."
Justin Harward : "I don't think we will see tapering until march or april but I'm curious if anyone has a differing opinion"
Matt Hodges : "my gut says unlikely with a change at the helm"
Justin Harward : "Just curious, anyone think we could see tapering in two weeks at FOMC?"
Adrian Webb : "how does the seasonal jobs factor in, I assume that will inflate the number a bit, right??"
Jeff Anderson : "Last month it felt like they were setting the bar so low it had to beat. This month it feels a bit high, as far as predictions. It feels to me like a slight mis in the 140-155k range for Friday. "