MBS Live: MBS Afternoon Market Summary
Today's session managed to be fairly interesting and refreshingly calm at the same time. The first two hours of the day were arguably less calm as the morning's economic data greased the skids for bond markets to slide further into the weakest levels in more than two months. But the Philly Fed Index arrested the slide and gave MBS and Treasuries a gentle push in the other direction. There was some barely-detectable volatility coming out of the 10yr TIPS auction at 1pm, but it was washed out in about an hour. MBS are now coasting toward the exits anywhere from 2 to 4 ticks higher on the day. In terms of 10yr yields, the resistance at 2.775+ is troublesome as this was the immediate high following yesterday's FOMC Minutes an his since seen several bounces yesterday, overnight, and today. That makes today's rally like a somewhat enjoyable birthday present that may or may not self-destruct in a few days. Some people might not even want to play with such a thing.
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.
2:06PM :
MBS Holding Gains After Fed Speakers; High Coupons Fili-busted
Momentum coming out of this morning's Philly Fed data leveled-off around noon, and looked to be under some pressure just after the 10yr TIPS auction at 1pm. Trading is getting a bit sloppy for MBS with liquidity much easier to come by in the morning hours. That means that buyers and sellers aren't necessarily interested in transacting business at the same time or at prices that are close enough to make it happen.
The implication is a choppy sideways trade, but one that has thus far held inside a reasonably narrow range between 100-28 and 101-02 in Fannie 3.5s. They're currently still up 2 ticks on the day at 100-29 and look like they'll continue to hold as long as 10yr yields are doing the same--holding a ceiling around 2.80.
The more that 3.5's hold here or improve, the greater the chances of positive reprices into the afternoon.
Simply as a matter of curiosity (because it doesn't affect reprice risk), upper MBS coupons (4.5 and higher) are in decidedly negative territory at the moment. This is a factor of news out of the Senate that Mel Watt's nomination to take over at the FHFA may no longer be blockable by filibuster. Watt is assumed to be more in favor of principal reduction programs and/or HARP expansion than Demarco. As a result, prepayment expectations shift for the higher coupons (the faster they pay off, the less valuable they are, so prices fall).
The implication is a choppy sideways trade, but one that has thus far held inside a reasonably narrow range between 100-28 and 101-02 in Fannie 3.5s. They're currently still up 2 ticks on the day at 100-29 and look like they'll continue to hold as long as 10yr yields are doing the same--holding a ceiling around 2.80.
The more that 3.5's hold here or improve, the greater the chances of positive reprices into the afternoon.
Simply as a matter of curiosity (because it doesn't affect reprice risk), upper MBS coupons (4.5 and higher) are in decidedly negative territory at the moment. This is a factor of news out of the Senate that Mel Watt's nomination to take over at the FHFA may no longer be blockable by filibuster. Watt is assumed to be more in favor of principal reduction programs and/or HARP expansion than Demarco. As a result, prepayment expectations shift for the higher coupons (the faster they pay off, the less valuable they are, so prices fall).
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.
Matthew Graham : "we don't really know what he would do, but the assumption is that it would be more aggressive than DeMarco, a well-known cyborg, programmed to run the tightest possible ship at the GSEs with less regard for the socioeconomic impact that more lending opportunities might have."
Timothy Baron : "Is Watt in favor of principal writedowns?"
Matthew Graham : "http://www.usatoday.com/story/news/politics/2013/10/31/mel-watt-filibuster-senate/3324165/"
Matthew Graham : "37 more times likely this afternoon vs this morning"
Brian Bockholdt : "Here's a fun topic.. When is HARP 3.0 coming?"
Blair J. Beard : "I'm at BBVA Compass and we'll do them."
Jay Rodriguez : "A shot in the dark but any lenders doing TX non conforming (a)(6) c/o retail?"
Jason York : "transfer taxes have $0 tolerance, at least in VA"
Hugh W. Page : "JR - I never saw seller transfer taxes paid by seller in NC disclosed on buyer's disclosures but now that I'm back in FL I see that they are disclosed. Why is it different in NC? Curious."
John Rodgers : "OO is correct but the LO has to disclose it"
Ted Rood : "Challenging part can be proving that SS will continue to be solvent for 3 years."
Sung Kim : "conventional shows awards letter as an "or" requirement. proof of receipt is only one form of proof of amount"
Hugh W. Page : "OO typically need to show 2 mos receipt also"
Sung Kim : "if it's an award letter then it's not "projected""
Oliver Orlicki : "can you use projected SS income if you have an awards letter showing the amonut and when it will start to be paid"
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