MBS much wider to TSYs all day....

Closing Marks...

FN30_____________________________________

FN 4.0 -------->>>> +0-10 to 98-13 from 98-03

FN 4.5 -------->>>> +0-09 to 100-14 from 100-05

FN 5.0 -------->>>> +0-05 to 101-27 from 101-22

FN 5.5 -------->>>> +0-06 to 102-19 from 102-13

FN 6.0 -------->>>> +0-03 to 103-12 from 103-09

GN30_____________________________________

GN 4.0 -------->>>> +0-08 to 98-17  from 98-09

GN 4.5 -------->>>> +0-07 to 100-17  from 100-10

GN 5.0 -------->>>> +0-05 to 102-04 from 101-31

GN 5.5 -------->>>> +0-06 to 102-28 from 102-22

GN 6.0 -------->>>> +0-04 to 103-14 from 103-10

(MBS continued to rally in after hours trading)

In what I would consider a quiet trading session, MBS incrementally improved throughout the day. A few lenders did pass along MBS gains to rate sheets but the overall primary mortgage market's consensus was...."not much noticeable difference".  Can you blame the lenders for that approach? I don't think I can today....not in this MBS market

Why?

First...on a fundamental level MBS coupons have been playing follow the leader with TSY recently. To simplify...when TSYs rally, MBS follows and spreads get wider. When Treasuries sell, MBS follows and spreads get tighter. Fundamentally with TSY refundings behind us fixed income traders should be looking to build in a "ghost of supply yet to come" premium into TSY prices. That would indicate...if recent trends continue...that MBS bids have some room to cheapen up with TSYs.

But then again there is always that ol flight to safety feature tied to Treasuries. Remember when equity investors need to seek shelter from "doom and gloom", panicked market participants scurry after a government guarantee. Why might this scare a lender? Since MBS ARE pacing the yield curve and headline news isn't getting any more DETAILED (until Wednesday)...it would make sense that exasperated and exhausted equity sellers MIGHT (there is no clear direction) find reason to rally!!! Not to mention some key "emotional" technical levels are being reached by stock indexes. For example the last time the Dow closed this low the Spice Girls were chart toppers. (that was for you JW/pinky).  

Furthermore the MBS market would looooove a sell off right now. The fuller side of the stack is looking too expensive and there isn't much reason to move down in coupon (yet?)...that was obvious today by the lack of trading volume.  If you are a mortgage banker...you might not want to provide too much motivation for MBS bids to move lower (the reason being supply)....at least not with the stock lever wound tightly anyway (bc MBS could sell off more if FTQ unwinds and you might lose your pants).

Mortgage market participants no matter the bias could use some cheaper prices...the Fed could use  buying support in the discount side of the stack and borrowers could use the cheaper prices to help stall profit takers in hopes that just maybe some money will move down in coupon on the "relative cheapness".

So given the general feelings of a "fundamental funk", if you are a lender it wouldnt make sense to get aggressive right now, especially not two days before we get HEADLINE DETAILS!!!

HEADLINE DETAILS???

YES....WHAT WE HAVE BEEN WAITING FOR...MORE DETAILS ABOUT THE HOMEOWNER AFFORDABILITY AND STABILITY PLAN!!!!

LINK TO HOMEOWNER AFFORDABILITY AND STABILITY PLAN....CLICK ME FOR Q&A

Wednesday MARCH 4 is HEADLINE DETAILS DAY for mortgage world.... the "DETAILS"  that are expected to be offered up will determine the perception that will establish a new trading bias in the MBS market ...

Getting ENOUGH DETAILS doesn't necessarily mean lower mortgage rates though. The MBS market needs to BELIEVE that the program created by the  Obama Administration will enable 4-5mn borrowers to refinance their mortgage into a lower rate. It's all about perception at this point. If the MBS market gets spooked about "ITSNBN"then money will flow into prepayment protected coupons (MBS moves down in coupon) and mortgage rates will move lower. The hope is that once rates move lower borrowers might actually start refinancing! If borrowers dont start "pulling the trigger" the MBS market will move back "up in coupon" and we will go back to erratic rate sheet strategies and more "follow the leader". If the MBS market doesnt BELIEVE in "ITSNBN" then the gyrating yield curve will play into the hands of profit takers and the MBS stack will remain stagnant.

I HATE TO BUILD IT UP BUT MARCH 4 IS AN IMPORTANT DAY...and lenders aren't going to "go out on a limb" for you right before it....

If you missed the analysis of the Housing Affordability and Stability Plan. You can read it HERE

There is also an originator driven discussion on some of the reforms we believe will be necessary to increase the effectiveness of the Homeowner Affordability and Stability Plan...Read HERE and HERE