Volume was surprisingly high today, relative to our exceptionally low expectations.  Even so, it ranks as one of the lightest days of the year, and we probably won't see a meaningful pick up until next week.

Most of the volume that showed up in MBS came courtesy of sellers cashing in on recently strong performance vs  Treasuries.  In other words, MBS yields have been grinding as close to Treasury yields as they were back in February 2013.  When that relationship gets too tight, it can trigger a move back in the other direction.

Despite the correction in spreads, MBS remained in positive territory all day.  Unfortunately for a few lenders, prices were at their highest right around the time they priced and they were subsequently forced to reprice when prices approached lows around the 1pm hour.

The day's economic data had little visible effect, but the 10am ISM data definitely coincided with some movement.  Surprisingly, Treasuries/MBS improved despite reasonably strong ISM numbers.  This could have almost everything to do with the tradeflow-dominated environment in force during these 2-3 weeks of the year, combined with what are still fairly low volumes.  Additionally, there's the notion discussed in the Day Ahead this morning of additional tapering being pretty well priced in already, and thus strong data shouldn't phase bond markets excessively (unless data comes along that makes it look like tapering could be accelerated).

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
94-31 : +0-01
FNMA 3.5
99-13 : +0-02
FNMA 4.0
103-01 : +0-03
2 YR
0.3840 : +0.0000
10 YR
2.9872 : -0.0188
30 YR
3.9203 : -0.0217
Pricing as of 1/2/14 4:24PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:03PM  :  ALERT ISSUED: MBS Underperforming Treasuries; Negative Reprice Risk for Some Lenders
10:48AM  :  Bond Markets Improve Despite Generally Stronger Data; Some Resistance Now
9:22AM  :  Holding Modest Gains After First Round of Data
8:48AM  :  SERVICE ALERT: Live Stream is Temporarily Unavailable

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Stewart Anderson  :  "Does anyone know if it's ever acceptable for gift funds to be used on an investment purchase?"
Jason Zimmer  :  "no gift funds on NOO"
Matt Hodges  :  "i haven't had to pursue a HELOC subordination in a while... anyone know how long USAA is taking?"
Ted Rood  :  "Watch out for them trying to steal your borrower, MH, they have done that to me when we went to change the loss payee on folks with USAA homeowners insurance."
Mike Drews  :  "scenario: trying to refinance a construction loan...borrower has an over run of 27k over his construction loan. Can I pay off both and have it remaina R&T?, or is it C/O since i'm paying off the over run?"
Ted Rood  :  "Can you prove where the 27K went? That's the hard part if it wasn't disbursed as part of the construction loan. Fannie Direct allows you to use appraised value rather than lot + improvements, but good luck proving it was part of the home if he paid it out of pocket,"

Economic Calendar
Time Event Period Actual Forecast Prior
Friday, Jan 03
9:45 ISM-New York index * Dec 608.5