In the day just passed, the bond market managed to improve at a fairly decent clip, but the gains were much easier to come by for Treasuries vs MBS.  Part of that was a factor of the time of day that the rally took place (MBS are typically less likely to keep pace with bigger afternoon moves in the bond market) and the other part was the simple rule of MBS tending to underperform when bond volatility is elevated.  It may not seem that volatility is elevated at the moment compared to some of the past 2 months, but that's only because bonds have been rallying recently.  Rallies still count as "movement" when it comes to volatility.  Simply put, MBS are best able to tighten (aka outperform vs Treasuries) when bonds stop moving around so much and instead hold in sideways, narrow ranges.  There have really only been 2 small blocks of time where that's happened since August's mega rally tipped over the apple cart. In the chart below, the blue line is the difference in yield between the MBS "current coupon" yield (a calculated value based on prepayment expectations and weighted for MBS production liquidity).  The higher the blue line, the weaker MBS would be performing vs Treasuries.  For the record the high/wide yield spreads seen in this chart are the highest/widest since before the MBS-specific QE3 in 2012. In the day ahead, we can ask ourselves the question posed in the title.  As the chart suggests, the baseline answer to that question is that MBS won't participate as much in this 1.5-week rally if Treasuries continue gaining ground.  We're more likely to see MBS improve vs Treasuries if this rally pauses.  The x-factor (also implied by the chart) is the potential recurring top in yields spreads (late August and right now).  There's some chance that these spreads will act as sort of a natural enticement for buyers to step in and buy more MBS. There are no top tier economic reports on tap to move markets today, but the 10am New Home Sales data can occasionally garner a reaction.  The 5yr Treasury auction at 1pm is also a contender, though by no means a guaranteed flash point for the bond market.  The most reliable market movers these days are the unexpected trade-related headlines.  As of this week, it looks like we can add domestic political developments to the list.  That said, the impeachment business wouldn't be a big deal unless a time comes where it looks like 2/3rds of the republican controlled senate would actually get onboard.

September 25, 2019 Download our Mobile App: Download our Mobile App: 30 Yr. Fixed 6.25% -0.04%   6.11% 7.26% 15 Yr. Fixed 5.71% -0.01%   5.54% 6.59% 30 Yr. Jumbo 6.25% +0.00%   6.25% 7.45% Compare Mortgage Rates from Local Lenders for Sep 25, 2019 Mortgage Rates Manage to Hold Near Weekly Lows Tue, Sep 24, 2019 3:11PM Mortgage rates managed to hold on to the improvements seen yesterday. This was far from a certainty yesterday afternoon as the underlying bond market had ebbed into weaker territory after hitting much stronger levels earlier in the day. The timing was such that most lenders simply waited for this morning to adjust rate sheets in a modestly unfriendly direction. But that likelihood depended on the bond market remaining at yesterday afternoon's levels. It didn't. As the day progressed, bonds improved. The biggest jump followed weaker economic data in the form of the Consumer Confidence report at... (read more) Mortgage News Daily Rate Change Points 30 Yr. Fixed 6.25% -0.04 0.00 15 Yr. Fixed 5.71% -0.01 0.00 30 Yr. FHA 5.99% -0.01 0.00 30 Yr. Jumbo 6.25% 0.00 0.00 7/6 SOFR ARM 5.64% -0.01 0.00 30 Yr. VA 6.01% 0.00 0.00 Updates Daily - Last Update: 9/15 Freddie Mac Rate Change Points 30 Yr. Fixed 6.35% -0.15 0.00 15 Yr. Fixed 5.50% -0.10 0.00 Updates Weekly - Last Update: 9/11 Mortgage Bankers Assoc. 30 Yr. Fixed 6.49% -0.15 0.56 15 Yr. Fixed 5.70% -0.14 0.55 30 Yr. Jumbo 6.44% -0.14 0.48 Updates Weekly - Last Update: 9/10 UMBS 30YR 5.5 101.29 0.00   97.47 101.61 UMBS 30YR 6.0 102.46 +0.00   99.66 102.50 10 YR Treasury 4.038 -0.002   3.621 4.780 MBS Live Day Ahead: Even if Bonds Can Continue Improving, How Much Will MBS Care? Wed, Sep 25, 2019 9:29AM In the day just passed, the bond market managed to improve at a fairly decent clip, but the gains were much easier to come by for Treasuries vs MBS.  Part of that was a factor of the time of day that the rally took place (MBS are typically less likely to keep pace with bigger afternoon moves in the bond market) and the other part was the simple rule of ... (read more) MBS Price Change UMBS 5.0 99.91 -0.01 UMBS 5.5 101.29 -0.01 UMBS 6.0 102.45 0.00 GNMA 5.0 100.21 -0.03 GNMA 5.5 101.25 +0.02 GNMA 6.0 102.01 +0.03 Pricing as of: 9/16 2:45AM EST US Treasury Yield Change 2 YR Treasury 3.538 +0.001 5 YR Treasury 3.606 +0.006 7 YR Treasury 3.788 -0.003 10 YR Treasury 4.038 -0.003 30 YR Treasury 4.659 -0.002 Pricing as of: 9/16 2:45AM EST Other News Strong Summer Finale for New Home Sales Wed, Sep 25, 2019 10:37AM New home sales in August reclaimed part of July's sharp loss. The Census Bureau and Department of Housing and Urban Development said sales nationwide of newly constructed single-family houses was at a seasonally adjusted annual rate of 713,000 units. This was 7.1 percent higher than the adjusted July rate , originally estimated at a 12.8 percent loss, but re... (read more) Mortgage Volume Retreats 10% Due to "Economic Uncertainty" Wed, Sep 25, 2019 8:06AM Although changes in mortgage rates were gradual and mixed during the week ended September 20, mortgage volume moved sharply lower. Refinancing was especially hard hit. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, decreased 10.1 percent on a seasonally adjusted basis from one week earlier. On an unad... (read more) Two Major Reports at Odds Over Home Price Trends Tue, Sep 24, 2019 10:18AM Both the S&P CoreLogic Case-Shiller indices and the Federal Housing Finance Agency's (FHFA's) House Price Index (HPI) were released on Tuesday. The Case-Shiller Indices showed prices generally slowing while FHFA's were more stable. The Case-Shiller National Index, covering all nine U.S. census divisions, was up 3.2 percent on an annual basis in July, the... (read more) Productivity, Credit, U/W Tools; Events and Free Training; Capital Markets Update Wed, Sep 25, 2019 8:33AM One could argue that house flippers could make less if they buy the house for more than they expected, costs were more than anticipated, or the sales price was less than hoped for. It can be a lot of work, especially if individuals are competing with big-time flippers working with computer algorithms. ATTOM Data Solutions came out with its Q2 2019 U.S. Home ... (read more) Latest Video January new home sales drop nearly 7% Bank of America CEO: Loan demand showing consistent growth UK parliament votes on options to delay Brexit January new home sales fall short of expectations, down 6.9 percent Around the Web Calculated Risk Blog Zillow Case-Shiller Forecast: Slower YoY Price Gains in August compared to July consumerfinancemonitor.com CFPB Issues HMDA Guides CNBC The Fed will be growing its balance sheet again, but don't call it 'QE4' CNBC As new home sales soar, analyst says entry-level price is 'redefined' higher Reuters Evans: Larger balance sheet may avoid future repo market problems Reuters U.S. new home sales increase more than expected in August Bloomberg Former Fed Official Kocherlakota Signals Concern for Repo Market CNBC Westpac sees the Fed cutting rates in October Bloomberg U.S. States Won't Join Century Bond Club Even If They Want To Reuters Pelosi to announce impeachment inquiry on Tuesday: Washington Post Calculated Risk Blog Update: A few comments on the Seasonal Pattern for House Prices Calculated Risk Blog Real House Prices and Price-to-Rent Ratio in July Bloomberg Dealers Rush to N.Y. Fed Repo Operations as Quarter-End Nears

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