MBS Live: MBS Afternoon Market Summary
Bond markets continue to adhere to the notion that near term economic data is fantastically important in honing in on a target date for tapering.  The closer we get to the first possible taper announcement on September 18th, the more the recently consolidative range looks to be bearishly sloped.  In other words, rates looked like they might have hit a ceiling just before the last jobs report and like they might be heading sideways in general, but the average session been weaker since then.  Now today, 10yr Treasuries have broken the 2.74 ceiling like it was part of the plan all along.  The saving grace, if any, is that MBS are in a better position to cope with 2.7+ 10yr yields are thus not back to their lows from late June and early July despite 10's hitting 2.8+ today. 
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
95-13 : -0-21
FNMA 3.5
99-17 : -0-18
FNMA 4.0
102-31 : -0-15
FNMA 4.5
105-17 : -0-10
GNMA 3.0
96-06 : -0-23
GNMA 3.5
100-17 : -0-19
GNMA 4.0
103-22 : -0-11
GNMA 4.5
106-02 : -0-07
FHLMC 3.0
95-03 : -0-21
FHLMC 3.5
99-08 : -0-18
FHLMC 4.0
102-25 : -0-14
FHLMC 4.5
105-02 : -0-10
Pricing as of 4:07 PM EST
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.

4:02PM  :  ALERT ISSUED: MBS and Treasuries Give Back Most Afternoon Gains
Fannie 4.0s are now back down to 102-31+ and 10yr yields are back up to 2.774 after an earlier rally brought them to 103-06 and 2.737 respectively. The trade-flow-based nature of the rally made it unlikely to push through those levels, but not necessarily likely to bounce back to current levels.

With a 7 tick gap in MBS from the highs, some of the lenders that repriced twice today may soon consider a negative reprice. Most of the lenders who only repriced one time today have room for a few more ticks of weakness without negative reprices being a risk. Some lenders may actually reprice positively (a few were just reported) if they hadn't yet repriced today.

All told, this is a fairly tame correction back to the day's prevalent range as opposed to high-momentum sell-off. It's not worthy of panic, but a faster-acting lender would be justified in mulling a reprice.
2:58PM  :  Fed MBS Purchases Move up in Coupon
The outright level of Fed MBS purchases have remained fairly steady--as they must considering the fixed dollar amount allocated to them each month from QE and the fairly stead amount from the monthly interest/principal payments on their existing portfolio. But the allocation of those purchases continues a shift toward higher coupons.

Last week's buying details showed $4.45 bln going to Fannie/Freddie 3.5 coupons with that number falling to $3.75 bln this week. 4.0 coupons (where most securitized loans between 4.375% and 4.875% end up) were at $4.05 bln last week compared to $5.05 bln this week.

Last week's details HERE. This week's details HERE.
2:34PM  :  MBS Hit Opening Levels; Positive Reprices; Hitting Resistance Now
Positive reprices have been reported and may continue to come across as MBS made it back to today's opening levels. 10yr yields have yet to break through the inflection point set up by Tuesday and Wednesday's high yields (2.73), but at 2.737, they got very close before bouncing up.

MBS were more willing to follow this most recent move with Fannie 4.0s making it back to 103-06, right in line with opening levels before bouncing back to 103-02 currently. MBS maybe have indirectly been a leader of the rally as well with the Fed's forced daily buying coinciding with a supportive level in spreads (meaning that MBS had underperformed Treasuries by as much as they had for several weeks, and at a level that has been frequently visited enough that it looked like the scene of a potential bounce).

Short covering in Treasuries added to the positive snowball--one that's easier to roll in lower afternoon volume. The trade-flow-based nature of the rally is already being felt as 10's are up to 2.752 in fairly short order. Some reprices may continue to trickle across, but while 2.73 remains unbroken, the broader picture is still fairly weak. Unless tomorrow's data is weak and 10's are moving strongly below 2.73, think of this rally as a consolation prize.
1:59PM  :  Treasuries Back to Pre-Data Levels; MBS Relucatantly Follow
At 2.763, 10yr yields are right in line with their 8:30am levels. The move lower followed a technical break at 2.774 just after 1pm. MBS have been a bit slower to follow the bounce back with Fannie 4.0s not yet back to their 8:30am levels (103-02 currently vs 103-05/06 at 8:30am).

Even so, it's been enough for one positive reprice so far. Others may be more shy until/unless we see more developed gains, and can attribute them to something other than a post-sell-off consolidation and covering of shorts.
12:55PM  :  Bond Markets Off Lows, but Struggling to Return to Post-Data Highs
Both MBS and Treasuries continue to limp along in significantly weaker territory on the day but are well off their weakest levels that followed the first round of data this morning. For instance, Fannie 4.0's briefly hit 102-20 and are now at 103-30, a level they've held at or near for more than 2 hours! 10yr yields were as high as 2.823 and relatively quickly bounced back to 2.772 before stocks opened. Those two levels have been bookends for the rest of the morning's range.

The Philly Fed data was the only saving grace among the economic reports as far as rates are concerned. While it did serve to reinforce the weakest levels as supportive, it's been frustratingly unable to to motivate a break back into "pre-data" territory (2.76's in 10's or much over 103-00 in Fannie 4.0s).

There is no other significant data on the calendar today, so we're left to watch markets "trade it out" in lower volume. There is a clearly delineated gap between 2.775 and 2.753 (the previous intraday high on July 5th). Unless we cross that gap, the damage is already done for today. If that happens, 2.73 would also be an important pivot point in confirming a short term recovery.

Sadly, there's no reason to expect this will happen. More likely, we've just seen confirmation that our post-FOMC consolidative range is sloped toward slightly higher rates as opposed to being a truly flat consolidation pattern. That does leave room for lower rates between now and NFP, but not without justification. Tomorrow morning's data is probably the next place we could find such a thing.
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.

Nate Miller  :  "REPRICE: 3:13 PM - Homebridge Better"
Nate Miller  :  "REPRICE: 3:12 PM - Freedom Mortgage Better"
Eric Franson  :  "REPRICE: 3:11 PM - Wells Fargo Better"
Rob Clark  :  "Their second."
Rob Clark  :  "REPRICE: 2:56 PM - Provident Funding Better"
Nate Miller  :  "2nd one today"
Nate Miller  :  "REPRICE: 2:54 PM - Green Tree Better"
Tom Schwab  :  "REPRICE: 2:20 PM - Franklin American Better"
Tom Schwab  :  "REPRICE: 2:20 PM - AMC Better"
lhefner  :  "REPRICE: 2:18 PM - Quicken Loans Wholesale Better"
Paul Cronin  :  "Moshe- you know the drill- Quick to kill & hesitant to help!"
Nate Miller  :  "few more ticks moshe more will come"
Dan Crowley  :  "REPRICE: 2:10 PM - Platinum Mortgage Better"
Moshe Berg  :  "Why are we not getting any reprices?"
Rob Clark  :  "REPRICE: 1:37 PM - Provident Funding Better"
Matthew Graham  :  "MG2, I think we began consolidating after June's sell-off, and that the consolidation is sideways-to-slightly weaker. There's plenty of room to trade down into the 2.6's before NFP, but as you suggest it will take some justification from data."
Michael Gillani  :  "MG- since we've broken our recent range and broken 2.75 today, do you forsee us trading in this new 2.75+ range until NFP barring any significant news or going back and forth including lower again leading up to the jobs report?"
Edgar  :  "JY-I agree it takes a lot of people out of the market but that really is not such a bad thing (long term) for our economy. The transition, which could take years, would be painful but anyone who thinks FHA can withstand a similar downtown to 2008 is wrong. The losses would be huge. Fannie and Freddie will get creamed as well. Now if they only loaned to people with DPs, solid credit and assets then the damage would be much less. If banks want to do subprime and lend to people with no DPs, lo"
Jason York  :  "its great to have higher DP requirements, but where do most people get the money from their down payment? From selling their current house, which has some equity. That doesn't happen as much anymore. So you have a someone that has just saved $35,000 cash in their savings bank to purchase a $350,000 house. Not a lot of customers are in that situation. Plus you then take out the whole first time homebuyer crowd."
Nate Miller  :  "REPRICE: 12:12 PM - Green Tree Better"
Brent Borcherding  :  "DP--Bank of America hasn't foreclosed in Oregon in almsot 18 months...they aren't even filing NODs. Just waiting."
Justin Shead  :  "I saw a lot of "ands" in that last statement. I think that there needs to be 10% down or 700 score and 40% DTI or 6 months reserves"
Edgar  :  "DP-increase sure, but not at 15-20% in 6 months (as we're seeing in some places of CA). 2-5% at most is a healthy market."
Dirk Postupack  :  "Wouldn't you want home prices to increase so that more people could refi instead of losing their home? I bet there is a ton of foreclosures that are waiting to happen yet but they are holding off to keep inventories down"
Edgar  :  "GF-I think you're right. I know this is not a popular opinion but I really think the industry needs to tighten up guidelines (DTI, assets, down payments, credit scores). The fact that you can still buy a home with 5% down, no assets and bad credit boggles my mind. The current expansion in values does not happen if buyers needed at least 10% down, 700 plus FICO score, 40% DTI and 3-6 months reserves. FHA is a major disaster and if the economy goes south FHA will blow up just like all those su"
Jeff Anderson  :  "JR, that is a huge issue. The fed didn't want QE2 after QE1 was done and I'm sure they didn't want to do QE3, but the economy can't stand on it's own quite yet IMO. I'd say QE4 is already being talked about. Just in case, you know."
Chris Kopec  :  "Brent, getting to your point on tapering.....if no taper in September, I don't see any relief for bonds.....it will take the talking heads about 5 minutes to pivot to the "what about October taper?" storyline."
Edgar  :  "BB-For me, and others I talk with, volume is WAY down in CA. Lenders are so dry everything is 24 hours."
Gus Floropoulos  :  "the lack of supply will keep the demand multiples high and thus keep prices in an upward trend until at some point the price on the RE and borrowing costs don't make sense....funny thing is the FED knows this, so the question is what is the game plan here? Maybe MG can enlighten us"
Brent Borcherding  :  "Gus, I'm shocked how quickly things have slowed in Portland, only anecdotally at date, but I think the data will follow. I live in the city in Portland and houses were 5-10 offers day 1 on the market just 2 months ago. We have 2, entry level homes in my neighborhood $400K, that have been on the market for nearly a month all of a sudden. We're also really short on supply."
Chris Kopec  :  "Good point JR.....I'm not sure if the economy stumbles.....I think we slow to a crawl, and tack on another year or two to where we'd be if the housing market still had Fed support."
Brent Borcherding  :  "No kidding, JR. If I were them, I'd not want to start tapering in September (not enough data) and wait to see what the recent rise in rates does to "recovery" in the coming months."
Gus Floropoulos  :  "and now, construction costs are high in addition to construction borrowing costs, and future end loan costs....long term I agree with your perspective, unfortunately it will take time to unravel "
John Rodgers  :  "The real fight isn’t in the taper talk. The fight will come when the economy really stumbles after the taper. Will the Fed have the cojones to continue to taper once they are criticized for tapering too soon? The genie has been out of the bottle for a long time and putting it back will be something to watch. "
Gus Floropoulos  :  "the lack of supply (at least visible supply) will keep prices in an upward trend regardless of rates"

Read what our user's have to say about MBS Live on LinkedIn.
» Start a two week free trial of MBS Live.