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MBS RECAP: Video Time Corresponds With Market Drama (Today's is 22 min.)
Feb 25 2021, 4:58PM
  • Staggeringly weak day for bonds.
  • 2.0 MBS coupon is now irrelevant.  2.5 is only game in town
  • Lots of general motivations to discuss (watch the video), but the 7yr auction was the only obvious moment for cause & effect
Econ Data / Events
  • Fed MBS Buying 10am, 1130am, 1pm

  • Jobless Claims 730k vs 838k f'cast, 841k prev

  • Durable Goods 3.4 vs 1.1 f'cast, 1.2 prev

  • GDP (revision, q4) 4.1 vs 4.2 f'cast

Market Movement Recap
09:10 AM

Modestly weaker in Asia, then significantly weaker in Europe, with 10yr yields rising more than 8bps by the open (high yield = 1.468%).  MBS are down 3/8ths after an incredibly illiquid 1st hour.  Econ data didn't have a big impact.  This is all bigger-picture momentum/snowball/technical trading.

10:58 AM

yields consolidated for the first two hours before breaking out to the high side.  Illiquidity surged in MBS and prices ticked down a bit more (2.5 coupons down 20 ticks or .625 on the day).  Baby bounce in the 10yr (down to 1.475 after hitting 1.494), but not taking anything for granted here.

01:00 PM

A bit of panic on both sides of the market with stocks down 2.2%+ and 10yr yields at 1.50%.  MBS aren't happy and negative reprice risk is a reality.  No new news behind the move.

01:26 PM

Huge losses after worst 7yr Treasury auction on record.  10yr hit 1.614 but is back to 1.50% now.  2.5 UMBS are trading around 103 (down 3/4ths of a point on the day), but liquidity is nowhere to be found.  Prices could settle anywhere within half a point of that.

03:16 PM

After a token bounce, more weakness at the 3pm CME close.  Bonds effectively back in line with weakest levels.  No particular reason.  Stocks are in the same boat.  

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
UMBS 2.5
102-27 : -0-31
10 YR
1.5300 : +0.1410
Pricing as of 2/25/21 4:55PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:15PM  :  ALERT ISSUED: Risks Ramping Back Up Heading Into Close
1:06PM  :  ALERT ISSUED: Worst 7yr Auction in YEARS Causes Another Spike
1:00PM  :  ALERT ISSUED: Negative Reprice Risk Increasing
10:45AM  :  ALERT ISSUED: Negative Reprice Risk Already Increasing In Some Cases
8:43AM  :  ALERT ISSUED: Much Weaker Overnight; Little-Changed After AM Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Tom Schwab  :  "On the bright side of this, there is virtually no EPO risk for loans we did over the last few months."

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Feb 25
8:30 GDP Prelim (%) Q4 4.1 4.2 4.0
8:30 Durable goods (%)* Jan 3.4 1.1 0.5
8:30 Core CapEx (%)* Jan 0.5 0.7 0.7
8:30 Jobless Claims (k) w/e 730 838 861
8:30 Continued Claims (ml) w/e 4.419 4.467 4.494
10:00 Pending Sales Index Jan 122.8 125.5
10:00 Pending Home Sales (%) Jan -2.8 0.0 -0.3
13:00 7-Yr Note Auction (bl)* 62

About the Author

Chief Operating Officer, Mortgage News Daily / MBS Live
A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators. ... more

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What happens if you just closed my house loan at 2.37% and mbs hasn't been issued yet? I would assume it would normally be pooled with in a 1.5 coupon mbs. Would it be the originator, the correspondent buyer or fannie/freddie that would be taking on that loss (can something this large be hedged even?)? (note I am just a curious consumer trying to understand the mortgage market)
Ted Rood
Mortgage Banker, The Federal Savings Bank
a 2.375% loan could be bundled into either a 1.5% or 2% coupon MBS. In either case, those are still be traded, even if less prominently than a couple of months ago.

More From MND

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