The lion's share of today's recap is available in the 3:18pm update below. Nothing about the day's theme changed from then on. In short, MBS were pulled higher by the position-squaring that took place in Treasuries on a fairly aggressive scale. This means that folks who had been betting that long duration (like 10 and 30yr) Treasuries would be moving higher compared to shorter duration Treasuries (like 2-5yr) got caught up in a stampede back in the other direction.
We sometimes talk about "snowball selling or buying," and that's what today was, but it didn't make for the big price swings normally associated with that term. Reason being: the snowball wasn't exclusive to one section of the bond market versus everything else, but rather divided between buying the long end and selling the short end. That's what provided the constant support for MBS today, despite stronger GDP this morning.
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
MBS Continue Higher on Treasury Tradeflow Glut
Positive reprices continue to be possible as MBS are pulled nominally higher by Treasury tradeflows. Here's what that confusing sentence means:
There was heavy betting through the end of November that the longer maturity Treasuries would suffer relative to the shorter duration stuff (because Markets saw Fed staying strong on front end guidance--i.e. "low Fed Funds Rate for a long time."
That sentiment began to wane heading into December, but made a small resurgence heading into FOMC Wednesday. That didn't turn out well and now there is a massive unwinding of these bets following FOMC. 30yr bonds are the biggest beneficiary, but 10's and MBS are catching a boost as well. MBS aren't trading too much at all and most of the improvement is coming from quotes being adjusted to keep pace with Treasury benchmarks.
Here's a chart of 5yr Treasury yields vs 30's to show the dynamic. The higher the line, the worse traders think 30's would do vs 5's (i.e. betting on 30's moving higher vs 5's).
Fannie 4.0s are now +10 on the day at 103-10.
Calmly Grinding to New Highs; Positive Reprice Potential
MBS continue to grind along a fairly low-volatility path toward higher prices. Short-covering has helped in Treasuries, as well as 'dip buying' (meaning that prices dipped earlier, and some seized on this as a buying opportunity). Tradeflows have been decidedly positive ever since then, and have had room to run until reaching current levels.
We'd expect to see slower going for the rally here, if not an outright bounce as it coincides with post-FOMC levels from Wednesday. Fannie 4.0s are right on the pivot at 103-06 (meaning that's where prices sank to following FOMC, and where we may start to see resistance today).
All that aside, we've seen enough so far to justify some positive reprice potential. Fannie 4.0s are up 6 ticks on the day, and some early rate-sheet lenders may simply be waiting on prices to level-off before pulling the trigger.
Live Chat Featured Comments
Sam : "some lender's are pricing them on 60 day locks"
Justin Harward : "Has anyone seen the Gfee start to be priced in? I heard a rumor wells was already today or would next week"
John Paul Mulchay : "but take it before end of march or UST disappears and you will be required to take the new exam that includes the UST."
Caroline Roy : "yes, MO. i took it last year and haven't gotten licensed elsewhere. gets you covered in case the test changes down the road"
Fritz Johnston : "last day to sign up for the test is March 31st - confirm on NMLS site"
Michael Owens : "that's what I thought. Take it and add states whenever. "
Andy Pada : "so one should take it after March 31?"
Fritz Johnston : "Yep..crazy not to take it..pretty simple..If you want to add states later you will need to take the full test again - after March 31st.."
Michael Owens : "Can you take the UST and then decide what states to add down the road...i.e. a year later if you want?"