MBS Live: MBS Afternoon Market Summary
To be sure, MBS made new lows today and scary ones at that. The 102-02 level for Fannie 3.0's was/is a major pivot point shared with the February highs, which provided firm resistance at the time. A pivot point can be thought of as "a ceiling when prices are under it and a floor when prices are over it." This is rarely a hard and fast rule, but rather, a pivot point exhibits historical tendencies to be crossed less frequently than other lines. Essentially, when we look for pivots, we're trying to identify the least frequently crossed lines with price action on both sides. Yesterday's supportive bounce late in the session combined with today's just after 11am added credence to the 102-02 pivot, but it was broken in the afternoon. Although prices recovered, they now faced ceiling-like resistance from what had so recently offered two great floor-like supportive bounces.

Read: Mortgage Rates Higher Still After Hitting Two Month Highs Yesterday
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
104-15 : -0-03
FNMA 4.0
106-04 : -0-02
FNMA 4.5
107-15 : -0-02
FNMA 5.0
108-18 : +0-00
GNMA 3.5
106-21 : -0-04
GNMA 4.0
108-18 : -0-04
GNMA 4.5
108-31 : -0-05
GNMA 5.0
110-05 : -0-03
104-09 : -0-03
105-28 : -0-02
106-24 : -0-02
107-27 : +0-02
Pricing as of 4:09 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.

3:22PM  :  ALERT ISSUED: Stabilizing After Hours. No Definitive Longer Term Implication
The worst looks to be over for today with Fannie 3.0's bottoming out at 101-25 and 10yr yields topping out at 1.859, essentially the support level from the overnight session.

Since 2pm, bond markets have clawed back a bit of previously lost territory bringing Fannie 3.0's back to 102-00 and 10's to 1.8364.

While this bodes well for the intraday time frame, we've seen similarly encouraging bounces intraday only to have the day as a whole turn into another brick in the staircase to higher rates over the past 3 weeks. We're actually most concerned with the high 1.7 range in 10's as a major pivot zone and shorter term with our failure to get back under the mid 1.82's high-volume mark from the morning hours.

With all that in mind, the afternoon recovery looks more like a "relenting of sellers" as opposed to a defiant counterattack among buyers. Longer term trend remains intact until it's no longer intact, though the respite this afternoon is welcome.
1:40PM  :  ALERT ISSUED: Convexity Snowball Is Rolling! Reprices A Near Certainty.
For you NOT to see a reprice for the worse today, MBS would have to stop on a dime, turn 180 degrees and rally like there's no tomorrow.

As it stands, the selling is now getting into territory that's causing convexity selling in lower coupon MBS, further perpetuating the overall snowball.

Fannie 3.0's are down to 101-28, lowest since May. 102-00 was a major pivot point. 10yr yields up to 1.85. Maybe support at 1.857 overnight high? If not, then all bets are off as to where the knife drops.

This is not a drill. It's getting ugly.
12:56PM  :  ALERT ISSUED: MBS At A Dangerous Tipping Point Long Term
MBS are at a major long-term pivot point in 3.0s. If things get any worse today, we could really see the convexity selling kick into high gear, pulling Treasuries along with it.

As of right now, 10yr yields are ticking up into the high 1.83's--highs of the day--and MBS are right on the long term pivot, down a tick on the day at 102-01. It's pretty serious if we don't bounce higher here... More serious if we fall directionally lower.

Either way, there is additionally negative reprice risk. We'd see them as fairly likely at these price levels, and probably fairly widespread. Some could be potentially big depending on the lender and their initial rate sheet for the day.

Apologies in advance if this is a head-fake, and we'll let you know ASAP if we bounce back into less scary territory.
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.

Steven Stone  :  "MERKEL ISNT ON VACA - SHES IN THE LAB trying to create that thing"
Brett Boyke  :  "Men in Black wand it"
Steven Stone  :  "let me know when thats going to be - ill go run up my equity line"
Steven Stone  :  "yeah like one big chapter 7"
Matt Hodges  :  "alienate Asia?"
Victor Burek  :  "cancel out all debt everywhere"
Steven Stone  :  "there was a dude on CNBC this AM that suggested that the us just cancel out its debt"
Joel Rodgers  :  "REPRICE: 2:02 PM - Wells Fargo Worse"
LSP  :  "REPRICE: 2:00 PM - PennyMac Worse"
LSP  :  "REPRICE: 1:59 PM - Franklin American Worse"
Matt Hodges  :  "http://www.cnbc.com/id/47942700/Treasury_Yields_Will_Hit_1_by_Year_End_Market_Watchers"
Rob Clark  :  "REPRICE: 1:59 PM - Stearns Lending Worse"
Matthew Graham  :  "REPRICE: 1:58 PM - Plaza Worse"
Bert Swyers  :  "REPRICE: 1:52 PM - NYCB Worse"
Victor Burek  :  "REPRICE: 1:49 PM - Nexbank Worse"
Rob Clark  :  "That is their second one"
Rob Clark  :  "REPRICE: 1:48 PM - Provident Funding Worse"
roland.wilcox  :  "REPRICE: 1:47 PM - USBank Worse"
Steve Chizmadia  :  "REPRICE: 1:46 PM - Pinnacle Worse"
Matt Sullivan  :  "REPRICE: 1:31 PM - Fifth Third Mortgage Worse"
Matthew Graham  :  "the thing that scares me about that one vs this one though is that both that mid-march sell-off and the other similar one in early october is that they were sudden and abrupt, with most of the selling occurring in 1-2 sessions, then flat. This time, the selling has been going on for close to a month. "
Matthew Graham  :  "yep. that's one of my few historical points of reference as well. Agreed."
Brent Borcherding  :  "I agree, CS."
Christopher Stevens  :  "rememeber the 10YR at 2.4 back in march when everyone thought economic numbers were starting to look good? Theh everyone realized they were not good and yld dropped below 1.8 in May. We seeem to be playing this over again."
Frank Ceizyk  :  "i think the point is SS, being at least educated about technicals as an LO helps you to provide value added guidance to customers rather than blow hopeful fundamental sunshine up their arses. These reversals help customers who otherwise don't understand that interest rate are very market driven--which means--sometimes things move big time"
Matthew Graham  :  "in the meantime, there are pipelines to protect and wise man once say "not everyone has the luxury of time on their side." "
Matthew Graham  :  "I would lean more toward a bounce back to 1.70-1.55 range still, but I don't know when"
Matthew Graham  :  "last 2 times we've seen similar moves, as I said yesterday, it's been 2-4 weeks before getting back to the initial scene of the breakout. And one other similar instance was "late 2010," which we've already discussed"
Dirk Postupack  :  "Rick Santelli said " he doesn't believe the sell off will have legs after the 1st week of Sept."
LSP  :  "REPRICE: 1:18 PM - Franklin American Worse"
Matthew Graham  :  "I TOO don't think the macro view justifies it! But that just doesn't matter right now."
Matthew Graham  :  "EVERYONE IS CORRECT that the macro view doesn't justify it! That's not the point."
Jeff Anderson  :  "It will pass 9/7. The day after the EU Ball Dropping Meeting. 26th time is still not the charm."
Benjamin Payne  :  "SS is correct in that the macro view doesnt justify this move"
Christopher Stevens  :  "the bond market does not care about the macro view at the moment"
Matthew Graham  :  "ah... I see you haven't been here to be verbally berated by me or AQ about mixing fundamentals and technicals"
Steven Stone  :  "im just saying on a marco view, theres no reason why we should be where we are"
Matthew Graham  :  "Here's my thing SS.... It's all well and good to say "this shouldn't be happening," and "this too shall pass." Maybe that turns out to be totally true. but the fact is that it IS happening right now and I'd vote in favor of the community keeping a defensive stance against it UNTIL/UNLESS it proves to be "JV traders" doing their somertime thing."
Rob Clark  :  "REPRICE: 1:09 PM - Provident Funding Worse"
LSP  :  "REPRICE: 1:08 PM - PennyMac Worse"
Matthew Graham  :  "Stock volume speaks well to it, bond volume does not. Let's not forget August 2011... Some market developments trump vacations."
Matthew Graham  :  "not saying it's not a factor. just that it's less pronounced than it has been in the past."
Matthew Graham  :  "ah the "JV Trader" defense... "
Steven Stone  :  "they leave the jr guys back at the office"
Steven Stone  :  "illogical summer time"
Matthew Graham  :  "going to defcon 2"
Brent Borcherding  :  "REPRICE: 12:57 PM - M&T Bank Worse"
Rob Clark  :  "The head interest rate strategist from Morgan Stanley stated in a memo today that the 10 year was oversold and expects the yield to drop again once Europe comes back online."
Matthew Graham  :  "AP, it even has its own wiki entry now: http://en.wikipedia.org/wiki/Libor_scandal"
Adam Quinones  :  "Everyone still expects lower rates, the question remains on what timeline though. Plan as if rates are not going back down and deal with the renegs later."

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