Stocks, oil, Euros, and other assets that bespeak growth and risk are weaker today while bond markets are stronger.  The opposite was initially the case overnight (except in the case of oil), but as domestic trading picked up for the day, bond markets bounced and stocks began selling off. 

The stock sell-off kicked into higher gear at the 9:30am cash open, but that only translated to minor additional strength in bond markets.  There hasn't been any significant data and participation levels are somewhat lower than last week's average.

A few points of order:

- This week's auction cycle begins a day early with 3yr notes this afternoon at 1pm.  3's typically don't produce much of a reaction.

- Tonight is "the roll" for Fannie and Freddie 30yr MBS.  That means January coupons will be retired and prices will reflect February coupons starting tomorrow morning.  February coupons have always traded at a discount to January coupons.  The gap between months tends to run about 8-12 ticks (.25 - .375).  So when we are looking at February prices tomorrow morning instead of January prices today, it will look like they've dropped precipitously.  Lenders are already well-aware of February prices and have already been using them to derive rate sheets.  There is no rate sheet implication from the roll.

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
102-16 : +0-03
FNMA 3.5
105-05 : -0-01
FNMA 4.0
106-27 : -0-08
2 YR
0.5570 : -0.0080
10 YR
1.9310 : -0.0191
30 YR
2.5180 : -0.0136
Pricing as of 1/12/15 12:25PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:41AM  :  Europe, Oil, Stocks, and Technical Support Help Bonds Into Positive Territory

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Andrew Russell  :  "Payment Calculation for Student Loans Fannie Mae requires that all deferred installment debt, including student loans not yet in repayment, be included in the calculation of the borrower’s debt-to-income ratio. In determining the payment for deferred student loans, Fannie Mae currently requires that the lender obtain a copy of the borrower’s payment letter or forbearance agreement or calculate the monthly payment at 2% of the balance of the student loan. Research has shown that actual monthly payments are typically lower than 2%. In addition, many student loan repayment structures now use an income-based approach in calculating changes in the payment due over time. As a result, Fannie Mae is modifying the monthly payment calculation from 2% to 1% of the outstanding balance. In addition, for all student loans, regardless of their payment status, the lender must use the greater of the 1% calculation or the actual documented payment. An exception will be allowed to use the actual documented payment if it will fully amortize the loan over its term with no payment adjustments. Updated Selling Guide Topics  B3-6-05, Monthly Debt Obligations (Deferred Installment Debt, Student Loans) Effective Date Lenders may implement these changes immediately but must do so for applications dated on or after April 1, 2015."
Andrew Russell  :  "You are only to take 1% of the balance instead of 2%, and you can only use the payment on credit if you can prove it is fully amortizing"
David Lurvey  :  "Yes, JS From Fannie: Deferred installment debts must be included as part of the borrower’s recurring monthly debt obligations. For deferred installment debts other than student loans, if the borrower’s credit report does not indicate the monthly amount that will be payable at the end of the deferment period, the lender must obtain copies of the borrower’s payment letters or forbearance agreements so that a monthly payment amount can be determined and used in calculating the borrower’s total monthly obligations. "
Jon Sanders  :  "Do deferred loans count against DTI with secondary market loans?"
Ira Selwin  :  " Where an appraisal has been obtained on the Case that was cancelled, mortgagees will be required to:  Certify in the FHA Connection Appraisal Logging screen that the previous Case Number was cancelled. Indicate in the User Certification section, by checking the “Certify Effective Date” check box, that the Case meets the certification criteria regarding the reason the effective date of the appraisal is prior to the Case Assignment Date."