MBS Live: MBS Afternoon Market Summary
A week ago today, we began wondering what the current week could possibly offer bond markets in light of the fact that next week brought month-end, the FOMC Announcement, the first potential ECB rate cut since July 2012, and of course, Friday' mighty Employment Situation Report. On the occasions where such relatively empty weeks have preceded truly epic weeks, it's not uncommon to see the "lead off" in one direction or another after starting out in a narrow range. As it happened, we stayed in that narrow range all the way through this morning and finally broke out after the weaker-than-expected GDP. As is the case with many of these lead-offs (both in markets and in baseball), this one still looks fairly "safe." In baseball, it would be enough to give the runner a headstart, but not so blatantly far from base that it put the runner at risk of being easily thrown out. In bond markets, charts tell the story a bit better, particularly, note how both Treasuries (top) and MBS (bottom) definitely broke past their most frequently hit resistance levels, but not past the recent outlying rally points. Conclusion: it's a lead-off, but a safe enough distance that the runner isn't bound to make a break for it without more motivation:
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
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Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.
12:35PM :
ALERT ISSUED:
Starting to Feel "Repricey" (The Good Kind)
No need to overcomplicate things, MBS are up. Fannie 3.0's pivoted over 104-17 heading into the noon hour. 10yr yields did the same with 1.668 (but "under" vs "over"), and both have since held the improvements. Keep in mind that the first rally of the day arrived before most any rate sheet, so we're only just now holding that 4 tick (.125) gain vs most rate sheet print times that connotes the early possibility of positive reprices.
11:42AM :
Revisiting Morning Highs, Stock Lever Disconnect
Stronger-than-expected Consumer Sentiment has not been enough to offset weaker GDP or the prevailing bullish sentiment in bond markets. That sentiment was made apparent even before the GDP report as improvements began right at 8am. There was a good bit of technical resistance to a move lower with yields relentlessly buffeting the thick glass range boundary at 1.674 all morning.
But cracks are starting to show now, and unlike Tuesday, these were achieved via a slow and determined grind lower in yield. Another clue to the resolve is that bond markets are very much marching to the beat of their own drum, looking almost completely oblivious to fluctuations in equities. These are the first real inklings of the "lead off" ahead of next week's big-ticket events that we mentioned as a possibility for this week.
MBS have moved to new highs on the day with Fannie 3.0s up 9 ticks at 104-17. 10's are down to 1.670.
It bears mentioning that 1.670 isn't a far leap from 1.674, and a few caveats might temper the bullishness (or paradoxically suggest more to come). The Fed just wrapped up a daily buying operation in 10's and before that, post-GDP short covering provided an extra bit of "oomph" to the fundamental motivations for the rally. In other words, conditions have been ideal to push yields lower but a sunny Friday afternoon ahead of only 1 more trading session before "month-end" may have concentrated the activity in the morning hours, leaving the afternoon at the whim of whoever sticks around the longest and speaks the loudest. Current spread levels in MBS cause some concern for afternoon leakage but that's not a hard and fast rule.
The main risk we're pointing out is that 10's might not really be at 1.670, but rather at a stretched and distorted version of 1.674. Whether or not this turns out to be the case should become more and more apparent as we move into PM hours.
But cracks are starting to show now, and unlike Tuesday, these were achieved via a slow and determined grind lower in yield. Another clue to the resolve is that bond markets are very much marching to the beat of their own drum, looking almost completely oblivious to fluctuations in equities. These are the first real inklings of the "lead off" ahead of next week's big-ticket events that we mentioned as a possibility for this week.
MBS have moved to new highs on the day with Fannie 3.0s up 9 ticks at 104-17. 10's are down to 1.670.
It bears mentioning that 1.670 isn't a far leap from 1.674, and a few caveats might temper the bullishness (or paradoxically suggest more to come). The Fed just wrapped up a daily buying operation in 10's and before that, post-GDP short covering provided an extra bit of "oomph" to the fundamental motivations for the rally. In other words, conditions have been ideal to push yields lower but a sunny Friday afternoon ahead of only 1 more trading session before "month-end" may have concentrated the activity in the morning hours, leaving the afternoon at the whim of whoever sticks around the longest and speaks the loudest. Current spread levels in MBS cause some concern for afternoon leakage but that's not a hard and fast rule.
The main risk we're pointing out is that 10's might not really be at 1.670, but rather at a stretched and distorted version of 1.674. Whether or not this turns out to be the case should become more and more apparent as we move into PM hours.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.
JCC : "REPRICE: 2:20 PM - Chase Better"
Tom Schwab : "REPRICE: 2:06 PM - Flagstar Better"
Nate Miller : "us bank will still do it, trying to qualify one is a beast though..."
Bryce Schetselaar : "correct. not available john"
John Paul Mulchay : "I hear crickets on cash out primary residence, I/O ARM. Is that a ghost scenario?"
Eric Franson : "I agree MG."
Matthew Graham : "that looks like wf's best rate sheet of the year by a small margin, depending on the rate/product."
Eric Franson : "REPRICE: 1:53 PM - Wells Fargo Better"
Chip Harris : "they have re-done those, but he won't come back out until he has a copy of the inspection report."
Kent Mikkola #353976 : "switch covers have to be done per HUD - safety issue"
Curt Sandfort : "Chip, if ordered through an AMC you might have better luck complaining to them."
Chip Harris : "Funny thing is that the reason the outlet covers and doors were off was because the seller put a clear cote on the floors over the weekend. Outlets were cloor outlets. Appraiser was supposed to show up Friday but never showed up until Monday."
Kent Mikkola #353976 : "Inform him that no inspection was done"
Chip Harris : "Anyone have any advice? Is there a guideline somewhere that says that the appraiser cannot ask for a copy of the inspection report? Can the borrower complain to HUD or something?"
Tom Schwab : "REPRICE: 1:10 PM - Franklin American Better"
Chip Harris : "JB, here is what he says in the appraisal: APPRAISER NEEDS NOTICE OF FOUNDATION INSPECTION, DOORS REQUIRE MOUNTING, AND SOME STITCH COVERS NEED TO BE INSTALLED. All the rest is done and reeady for the appraisel update but he wants the inspection report. Buyers did not do one as I guarantee he knows more than the inspector ever would anyway."
Adam Dahill : "Ted rood- lock in agreement "
Justin Bayle : "that may clear it with the underwriter"
Justin Bayle : "Get a copy of the inspection report and check out the foundation section"
Matt Hodges : "assume they can make the appraisal "subject to""
Justin Bayle : "they can note the supposed damage, take a picture of it and then it's up to the underwriter"
Justin Bayle : "The appraiser can't request the inspection Chip"
Chip Harris : "I have an appraiser that is asking for a copy of a foundation inspection report for a home because there is a small crack in the basement floor. Can;t even fit a penny in it. Does an appraiser have the right to make the borrowers do an inspection? The buyer is a contractoe and did not see any issues with it. FHA loan. Seller is a HUD approved non profit and the CEO is a former builder. He would not have bought it if he felt there was an issue obviously. "
Ted Rood : "GFE, rate lock, or just generic estimate?"
Adam Dahill : "Just lost a deal to TD bank. Those guys must be buying the market. 3.375% 30yr to 5mm. No points. I've seen it with my own two eyes. Simply crazy "
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