In the Day Ahead, we discussed bond traders' probable goals regarding keeping things as calm as possible.  This depended on unexpected headlines and movements in external markets.  Either of those were capable of throwing curveballs, and both threw a few today!

Out of the gate, bonds were flat, but once equities trading picked up, Treasuries improved in line with a morning stock sell-off.  At the time, it looked like stocks were set for a death-spiral well-into the lowest levels in more than a month.  While most averages were indeed lower on the day, the losses were moderate.  In fact, stocks were briefly positive due to mid-day Trump-related drama.

This installment featured Bannon's departure from the White House team.  I don't have any political views on this development, but markets liked it.  Well, stocks liked it, and bond yields were fairly well tied to stocks today.  As such, the news of Bannon's ouster pushed yields into negative territory heading into the afternoon, but both stocks and bonds ultimately moderated with the latter drifting sideways near unchanged levels to end the day.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
103-09 : -0-02
10 YR
2.1974 : +0.0004
Pricing as of 8/18/17 8:19PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:45PM  :  ALERT ISSUED: Bigger Shift, Bigger Reprice Risk
11:29AM  :  ALERT ISSUED: Negative Reprice Risk Increasing
10:47AM  :  Low Volume Mini Snowballs Helping Bonds

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Tom Schwab  :  "I certainly don't want to encourage RP's worse but it is useful to underscore MG's alerts that they are prescient and accurate. Or... IMPAC has a subscription to MBSLive."
Matt Hodges  :  "hope Bannon isn't trying to buy a house...that Verbal VOE will be awkward"
Tony Garcia  :  "Aug. 19 DU updates PIW offers to include some purchase transactions Fannie Mae is updating Desktop Underwriter® (DU®) effective Saturday, August 19, to offer Property Inspection Waivers (PIWs) on some purchase transactions (view DU Release Notes). This update responds to market changes, and allows our lenders to offer their borrowers a choice for efficiency and cost savings by foregoing an appraisal on some lower-LTV loans. Eligibility is limited to one-unit principal residences and second homes up to a maximum 80 percent loan-to-value ratio. It is estimated that PIW offers will be issued on less than 5 percent of purchase transactions. Offer rates will vary by lender and fluctuate over time. Lenders have the option to exercise a PIW offer, and may not accept it if they have any reason to believe that a full appraisal should be provided (for example, if there was a hurricane or other natural disaster in the area of the property), or if the borrower wants an appraisal. View more information about PIWs. Borrowers always have the choice to obtain an appraisal. Based on Fannie Mae's experience with purchase appraisal waivers, we expect the acceptance rate on appraisal waivers for home purchases to be low. Many home buyers want an appraisal to support the price they pay for a home, and the majority of purchase contracts include a contingency clause for an appraisal. Fannie Mae continues to require full appraisals on the vast majority of purchase money mortgages to establish market value of homes and provide valuable input to our appraisal database to support Collateral Underwriter® analytics and future innovations."