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MBS RECAP: What's Up With MBS Underperformance Today?
Aug 17 2021, 3:51PM

As long as we're not dealing with big, obvious, unique market realities (i.e. financial crisis, QE3, Covid and the aftermath), MBS do a pretty great job of moving the same direction as US Treasuries and by roughly the same amount.  Today was not one of those days, at least if we're looking for 10yr yields to set the tone.  Our first clue is seen in the 5yr sector, where Treasuries are negative on the day.  In other words, the yield curve is steeper.  Since the average mortgage doesn't tend to last nearly 10 years, it's not unreasonable to see MBS take pages out of the 5yr playbook.  Additional reasons will be discussed in today's video.

Econ Data / Events
  • Fed MBS Buying 10am, 1130am, 1pm

  • Retail Sales -1.1 vs -0.3 f'cast, +0.7 prev

  • Industrial Production 0.9 vs 0.5 f'cast, 0.2 prev

  • Builder Confidence 75 vs 80 f'cast, 80 prev

Market Movement Recap
08:26 AM

Stronger bonds overnight as covid concerns continue to weigh.  Better buying in Europe, right at the open.  10yr down 4+ bps ahead of Retail Sales at 1.225%.  MBS just barely positive, but still trying to find liquidity on the day.

09:28 AM

Additional weakness heading into the 930am NYSE open.  Bonds briefly turned negative (MBS still are).  Corporate issuance, industrial production, and mostly momentum/technicals as the low yields coincide perfectly with the bottom of February's gap.

02:29 PM

Off the weakest levels, but MBS continue to underperform.  2.0 coupons down 1 tick (.03) on the day at 101-11 (101.34).  10yr yields are back into positive territory, down 1.5 bps at 1.253.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
UMBS 2.0
101-09 : -0-03
10 YR
1.2630 : +0.0060
Pricing as of 8/17/21 3:51PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:35AM  :  ALERT ISSUED: Negative Reprice Risk Increasing Slightly
9:28AM  :  ALERT ISSUED: Bonds Turning Negative
8:39AM  :  Weaker Retail Sales, But Not Weak Enough For Bonds

Economic Calendar
Time Event Period Actual Forecast Prior
Tuesday, Aug 17
8:30 Retail Sales (%)* Jul -1.1 -0.3 0.6
9:15 Industrial Production (%) Jul 0.9 0.5 0.4
10:00 Business Inventories (% ) Jun +0.8 0.8 0.5
10:00 NAHB housing market indx Aug 75 80 80
Wednesday, Aug 18
7:00 MBA Purchase Index w/e 252.0
7:00 MBA Refi Index w/e 3684.3
8:30 House starts mm: change (%) Jul 6.3
8:30 Housing starts number mm (ml) Jul 1.600 1.643
8:30 Building permits: number (ml) Jul 1.610 1.594
8:30 Build permits: change mm (%) Jul -5.3
10:30 Crude Oil Inventory (ml) w/e -1.055 -0.447
14:00 FOMC Minutes *

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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More From MND

Mortgage Rates:
  • 30 Yr FRM 3.19%
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  • 15 Yr FRM 2.57%
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  • Jumbo 30 Year Fixed 3.12%
MBS Prices:
  • 30YR FNMA 4.5 108-02 (0-02)
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  • 30YR FNMA 5.0 110-01 (-0-01)
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  • 30YR FNMA 5.5 111-27 (0-00)
Recent Housing Data:
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  • Refinance Index 3.16%
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  • Purchase Index 1.82%