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Too Strong to Give Up Hope. Too Weak to Rest Easy
- New week, new month, new chance for yields to confirm a ceiling after last week's rout
- Mixed results for bonds today with early weakness and a late bounce (especially for MBS)
- Very poor liquidity in MBS (buyers and sellers oftentimes FAR apart on their desired prices)
- 100% focus on UMBS 2.5 coupon (why?)
- Bottom line: not enough weakness to give up hope. Not enough strength to rest easy.
Econ Data / Events
Fed MBS Buying 10am, 1130am, 1pm
ISM Manufacturing 60.8 vs 58.8 (ties highest level since 2004)
ISM Prices Paid 86.0 vs 80.0
Construction Spending 1.7 vs 0.8 f'cast
Market Movement Recap
08:53 AM Flat in Asia then moderately weaker in Europe. 10yr low = 1.38%. Highs of 1.456% this morning, but already pushing back down (1.43% currently). MBS opened weaker, but seem eager enough to hold a majority of Friday afternoon's gains. So far, so good, despite the weaker start (down only 0.06) now.
10:18 AM Balmy ISM (ties highest level since 2004). Much higher prices. Big beat on construction spending, and bonds are... RALLYING?! Either the broader bounce narrative is dominating or traders just aren't worried about March 2021 as much as March 2022. Either way, we'll take it. 10yr back to unchanged, and MBS up 6 ticks (.19).
11:29 AM Dropping off a bit now, but MBS are highly illiquid (wide spread between bid and ask). No news or events behind the trade. Bonds just shied away from committing to the morning rally. 10yr +3bps at 1.436 and UMBS 2.5s down 1 tick (-0.03) at 103-22 (103.69).
03:32 PM The noon hour was basically the bottom for MBS prices. Treasuries didn't weaken much after that either. While the latter are still flat at moderately weaker levels, MBS are staging a stronger comeback, with 2.5s on the verge of breaking even and 2.0s having already done so. Liquidity is HORRIBLE. Buyers and sellers are routinely more than an eighth of a point apart on 2.5 coupons (makes the true price a bit of a moving target).
MBS Commentary
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Too Strong to Give Up Hope. Too Weak to Rest Easy
- New week, new month, new chance for yields to confirm a ceiling after last week's rout
- Mixed results for bonds today with early weakness and a late... (read more)
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Mortgage Rate Watch
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Rising rates have been on the menu for months, but the drama kicked into a higher gear this week. Maybe you heard about this? We've certainly been discussing it in recent newsletters ( especially last week's ). The rising rate narrative hit the mains... (read more)
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Rob Chrisman
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With the jump up in mortgage rates Thursday, and the move back down Friday, a few lock desk personnel wrote to me over the weekend asking about ways of keeping LOs who floated when rates were low, or locked loans at the bottom, off their back . Here ... (read more)
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Housing News
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Black Knight reports a second increase in the number of loans in pandemic related forbearance plans in as many weeks. Forborne loans rose by 21,000 during the week ended February 23 after falling below 2.7 million for the first time since last April ... (read more)
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Housing News
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Deadlines for COVID-19 related relief for borrowers with Fannie Mae and Freddie Mac (GSE) mortgages were extended by the Federal Housing Finance Agency (FHFA) for the second time in a little over two weeks. The agency said the new changes were made t... (read more)
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Housing News
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Freddie Mac reported this week that its total mortgage portfolio increased at an annualized rate of 16.1 percent in January compared to a 22.4 percent gain in December. The portfolio balance at the end of the period was $2.777 trillion compared to $2... (read more)
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