MBS Live Recap: Mortgage Market Rocked by Instant Doubling of Regulatory Fees

Consider this: the average guaranty fee (charged by Fannie/Freddie to ensure timely payments to investors), including upfront LLPAs and the ongoing fees built into monthly payments netted the agencies roughly 48bps in Q2.  In one abrupt announcement last night, they added 50bps for refis, more than doubling their take.  Purchases got caught in the crossfire.  It's a big mess for the moment.  The last 8 minutes of today's video talks all about it.

Econ Data / Events
Market Movement Recap
08:19 AM

Bonds were stronger at first in the overnight session, but Treasuries began losing ground after 5am ET.  10yr yields are now 1.35bps higher on the day at .6866 (notably still under the .69% pivot point).  MBS are outperforming significantly, up more than an eighth of a point at 103-05 (103.16).

01:23 PM

MBS had been holding up fairly well but they are tanking now, largely in response to a broader tanking in the bond market following the weak 30yr auction.  2.0 UMBS are down a quarter of a point from this morning.

02:16 PM

Bonds continue to tank, led by Treasuries, but mortgages are grudgingly following.  UMBS down more than a quarter vs this morning.  Widespread reprices.  10yr up more than 5bps to .7257.

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