When this morning's economic data came out, stronger-than-expected Jobless Claims and GDP combined to cause brisk selling at first. By the end of the day, however, MBS made two strong showings at slightly higher lows. One good reason for MBS' refreshing resilience is the fact that the economic data wasn't as simple as the headlines suggested. Jobless Claims were potentially distorted due to seasonal issues with the Labor Department's adjustment calculation. GDP may have come in at 3.6%, but 1.4% of that was from inventory hoarding.
The other, less overt factor, may have been the technical landscape noted in the Gorilla analysis
this morning. That is to say that bond markets had experienced sufficient weakness so far that strong data this morning wasn't necessarily going to cause an epic sell-off (or in terms of the analogy, traders had retreated far enough out of town that they could now wait to find out if the gorilla was real without having to retreat much further until then). The big jobs report hits at 8:30am tomorrow morning and the current consensus is for 180k payrolls as well as 180k private payrolls. The unemployment rate is seen dropping to 7.2 percent.
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
Reprice Risk Incrementally Increasing; No implication on Longer Term Strategies
The technical dominoes to which we alluded in the last update have started falling. 10's broke their ceiling and have ticked up briefly to 2.877. MBS shed a few more ticks in response. Although there's nothing significant happening behind the scenes right now, these fluctuations do introduce just a bit of negative risk.
At this point, it wouldn't affect most lenders and the better conclusion is that chances of positive reprices are drying up. If you were going to lock before NFP, that makes this a good time. If you were going to float, this isn't the sort of weakness that should make you change your mind.
Treasuries and MBS Slipping; Reprice Risk Likely in Check
Money is flowing out of both stocks and bonds since 1:18pm. MBS are still about their lows seen in the 11am hour with Fannie 4.0s down 4 ticks on the day at 103-15. Meanwhile, 10yr yields are near session highs, currently up 2.5bps at 2.8662.
The weakness so far isn't likely to prompt any negative reprices, but if 10's take out their session highs at 2.872, we could see moderate, technically-motivated selling momentum that spills over into MBS. Reprice risk could increase in that case.
Bottom line, if you were planning on locking before NFP tomorrow, it's looking less and less likely that you'll see positive reprices.
Live Chat Featured Comments
Matt Hodges : "looks like WF was .125-.25 improvement depending on rate"
John Paul Mulchay : "A nice spot to give kudos to our beloved MND."
John Paul Mulchay : "So I was messing around in Linkedin yesterday and looky what I found http://www.linkedin.com/company/mbs-live-/mbs-live-512212/product
Eric Franson : "REPRICE: 2:30 PM - Wells Fargo Better"
Matthew Graham : "RTRS- BANKS, BUSINESSES NEED FISCAL CLARITY FROM CONGRESS TO GO OUT AND LEND - FED'S FISHER "
Matthew Graham : "RTRS- DALLAS FED CHIEF FISHER SAYS UNEMPLOYMENT RATE IS STILL HIGH AND YET TO BE SATISFACTORY "
Hugh W. Page : "I'm with you TR. Especially with the volatility we've had for so long. "
Ted Rood : "Disclaimer, I run DU/LP, only real issue is the appraisals and research values first to make sure we're in the ball park."
Ted Rood : "I lock 80%+ of loans at application, given client approval of pricing and lack of a clearly defined improving market. Only had to renegotiate one loan all year, and didn't lose any due to worsened pricing on floating loans."
Matt Hodges : "that played into my mind as well. pull through is veryimportant"
Matt Hodges : "oh, we do as a correpondent"
FPH : "OK, so as a Broker pull through is something that you have to also manage. I work with a lender and dont really consider that aspect."
Matt Hodges : "we don't have one per se, but one situation was a close prior to start job, and only 3 of our lenders will do it. Didn't want to lock prematurely, if we had to wait until he started, +1 month"
FPH : "MH, what is your lock policy relating to UW?"