MBS got very close to their best levels of the year today, as did mortgage rates.  Treasuries, on the other hand, crashed through their previous floor by several bps following headlines that suggested Ukraine and Russia are on the verge of war.  One caveat to those headlines is that NATO has yet to confirm that any of the underlying events actually transpired, not to mention more recent reports of Russia denying the presence of any military personnel in the humanitarian convoy.

This is par for the course when it comes to geopolitically-motivated bond market rallies, and it's made worse by the fact that MBS have some other considerations weighing them down specifically.

laundry list thoughts include:

  • decreasing summertime liquidity is more of a factor for MBS vs Treasuries
  • Uncertainty surrounding some sort of legislative intervention in securitization markets--however uncertain that may be
  • Recent FHFA proposal to merge Fannie/Freddie securities.
  • Limited "room to run" as the next coupon down from current most-liquid
    coupon does not yet look like a safe place to congregate.  (i.e. no one
    wants to be left holding that bag of Fannie 3.0s when 3.5s are already liquid and may well be as low as liquid coupons go.  Wheatver the case, it's just too soon to buy in to 3.0s as a coupon with staying power).

Beyond those MBS-specific concerns, lenders tend to be more conservative heading into weekends.  All that having been said, rates still managed to come very close to their best levels of 2014, so we can't complain too much.  Our clients should understand, however, that mortgage rates simply aren't falling as quickly as Treasuries in this environment.

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
99-10 : +0-11
FNMA 3.5
102-27 : +0-07
FNMA 4.0
105-27 : +0-04
2 YR
0.4110 : +-0.0010
10 YR
2.3410 : -0.0570
30 YR
3.1300 : -0.0700
Pricing as of 8/15/14 5:13PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
4:11PM  :  ALERT ISSUED: No New Selling, but Negative Reprice Risk Remains
2:25PM  :  ALERT ISSUED: MBS At Post-Rally Lows; Negative Reprice Risk Could be Increasing for Some
12:00PM  :  Strongest Move Since January Remains Intact After Ukraine Headlines
10:45AM  :  ALERT ISSUED: Whoa! What's up With the Spike in Bond Prices/Yields?!
9:54AM  :  Bond Markets Mostly Ignore Data and Continue Positive Overnight Trend

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "If MBS had any reasonable assurance that the yard-sticks were moving for more than a few weeks, maybe it would be a bit better. There's also uncertainty about the potential evolutions of securitization in general; some lingering possibilities that legislation could mess with the GSEs in some way; uncertain impact of of lawsuits; combining Fannie/Freddie's offerings into a single security; decreased liquidity in general and decreased MBS-specific liquidity have price consequences, you name it!"
Jeff Anderson  :  "MG can talk about the less demand or not, but the usual flight to safety in the benchmark so MBS' just need a little time to catch up."
Andrew Haynes  :  "less demand for mbs in general"
Andrew Haynes  :  "why is that? fed taper maybe?"
John Sheadel  :  "Yes. MBS lagging significantly, relative to June. But such is the way of things. "
Ted Rood  :  "I'll be forwarding that newstream "Failing to Refinance" article to several clients!"