Mortgage and Interest News
MBS OPEN: Rates Ticking Higher Just Because They CanGood Morning. I've had some great coaches in my lifetime...none better than my high school/juniors hockey skipper. Many of the messages he bestowed upon me have carried over from the locker room into my professional life. One of my favorites is the K.I.S.S principle. KEEP IT SIMPLE STUPID This is incredibly relevant to the current market environment. The econ calendar isn't providing much meaningful guidance at the moment. Stocks are still showing an unwavering inclination to do what they want, when then want. Politicians are counting votes, leaving some of the most important reform debates of our era at the mercy of party lines. Fiscal affairs abroad are falling victim to heavy scrutiny AND speculation. Overall, this doesn't paint a very clear BIG PICTURE perspective. Well actually...(read more) 
Explaining The MBS Settlement Process10yr Notes progressively improved into the PM , ending 5 ticks better on the day with a yield of 3.70. MBS fought off much of the AM weakness in tsy's, and rallied just as well into the PM, reaching 101-15 at 4pm. But then we ended 4 ticks down on the day at 101-01! WHAT?!?!? So you're tellin' me MBS effectively erased all gains from the past two days?! Not exactly... I'll let AQ explain... -------------------------------------------- If you haven't read the following description of the agency MBS settlement process...please don't skip over it as it may save you from having to change your pants when next month's settlement rolls around. If you have read it...go over it one more time just to make sure the underlying logic is clear. The March FN 4.5 MBS coupon has...(read more) 
MBS AFTERNOON: Potential Reprices For The BetterMBS Off To The Races with 4.5's up 8 ticks to 101-15! 10yr up 5 ticks on the day dropping yield to 3.70 (through post auction resistance) Reprices for the better = highly likely From the Ninja: Mortgages are still on hold as today’s 3yr note auction held few surprises-everyone loves the shorter end of the curve; don’t you? $40 billion notes maturing in 2013 is quite commonplace and the sheer size of the issue is no longer an emotional and or logistical challenge to anyone directly (or indirectly, on the bid) involved. No real change to the way we do and or perceive business here in MBS secondary trading land. The market is better into lower and or range-bound rates, like today, and not as excited should the treasury market break out to the upside to prices (and lower interest...(read more) 
MBS LUNCH: 3 Year Note Auction Results And ReactionImmediately following the 3yr Treasury Note auction, treasuries weakened while MBS held steady. Since then, MBS have lost a few ticks, but the 4.5 remains positive on the day, up 1 tick at 101-07. The 10yr note is also up a tick leaving the yield just under 3.72. The 10yr's post auction selling turned the corner very much in line with yesterday's high yields suggesting a shift of guidance to tomorrow's auction. . MBS is building a case for support just over 101-06, but as volume remains fairly light, again, the emphasis is even more squarely on tomorrow's auction than it already was. Until/Unless 101-06 breaks down in a significant way, the chances of reprices for the worse remain limited to "knee-jerk only," but we're not seeing justification for that. In 10yr...(read more) 
MBS MORNING: Fed President Reminds About Labor Market WeaknessI am kinda bummed no one laughed at my Kathy Ireland reference in MBS OPEN . Her dress was so tight you could see her liver processing the booze (that's a rumor). I suppose I could have poked fun at Sarah Jessica Parker's "Queen of the Nile" get-up. Ugh. You guys are killing me. Is this one of those "you had to be there" jokes? I know I am setting myself up to be mocked because I watched the Oscars...but come on, there is humor in everything we do. (Like I said, I lost control of the remote. Other men: don't pretend you didn't watch. You know what I am talking about here!) Ok I am done pretending I am Perez Hilton. HAHA back to the markets. Chicago Fed President Charles Evans, a middle of the road on inflation non-FOMC voter, shared prepared remarks with...(read more) 
MBS OPEN: Flight to Quality in Light Trading VolumeGood Morning. Happy Standardized Test Tuesday! My nephew has Maryland School Assessment tests today, we were pre-gaming this morning. I remember those days pretty well...mostly because they were so incredibly boring and slow. Also because the test's time slots subtracted from favored subjects such as recess and P.E. What I should really be saying is HAPPY FLIGHT TO QUALITY TUESDAY!!! While you were sleeping, a senior director at Fitch Ratings by the name of Paul Rawkins told folks at a conference in London that Portugal's "pedestrian approach is a concern for us". Notice I didn't mention anything about Greece??? Yeh. Thats because more than one EU country is facing some sort of ratings downgrade. Whether or not these concerns are truly legitimate or a target of trader...(read more) 
MBS CLOSE: Strong Vs. Treasuries, But Lackluster Day All AroundNo material change since 10:30AM MBS 4.5's unchanged on the day at 101-07 10yr note 4bps higher on the day to 3.72 Stocks were up, down, up, closed flat No data tomorrow either, then 3yr note auction at 1pm Fed Evans at 930am Big Picture: something's gotta change, or long, slow, grind continues. I wanted to show you the same chart from the Afternoon notes, now updated for the past few hours for the sake of comparison, but I had to send it off to whatever company that is that prints those little activities on my kid's dinner menu where he's supposed to find the differences between two pictures. They heard about those two MBS charts and were thrilled at the possibility of just putting out one puzzle this year that would keep everyone guessing as to whether or not there was even...(read more) 
MBS AFTERNOON: Extremely Quiet Day Winding Downridiculously flat trading in MBS and Tsy's low volume, sparse data calendar, looking toward auctions Did we mention flat trading? You'll rarely see MBS and Treasuries trade this flat for this much of the day. From 10:45 on, MBS haven't moved more than 1 tick and tsy's not more than 1bp. Volume is light on both fronts with MBS just over half recent norms. Perhaps even more telling, a quick scan down Fannie, Freddie, and Ginnie MBS from 4.0 to 6.0 shows every security in that range UNCHANGED on the day, except Ginnie 4's, currently up ONE tick. Yawn..... Stocks are pretty much unchanged across big 3 indexes as well. No further data today (not like there was any this AM), and biggest event tomorrow, apart from 3yr auction, looks to be fed-speak! Other than 10yr Auction, Wednesday...(read more) 
MBS LUNCH: Support Found at Mid-Range Marks. Preparing for More Debt SupplyDid anyone happen to catch Saturday Night Live this weekend? Alan, the lovable moron from "The Hangover" was the host. I suppose I should share his real name too: Zach Galifianakis. I usually watch SNL on Hulu whenever I have time...but this weekend I happened to be in front of the boob tube to catch it live. I have to say, that entire cast is fully devoted to their careers in comedy. If you missed it or just need a good laugh again...take a few minutes of your day and watch some of the clips , especially the " Kissing Family " skit. My ribs still hurt from laughing. Seriously. Trading in the rates market today has been slower than Allen Iverson's exit from the NBA ..but not as painful to watch. 361,592 10 yr contracts have swapped hands in the rates futures market,...(read more) 
MBS MORNING: Benchmark Rates Higher in Quiet Trading EnvironmentGood Morning. Happy Monday. I don't know what the weather was like this weekend where you live, but here in the DC/Baltimore metro area we finally had a change of pace from snow and ice: SUN ! Every field was occupied with some sort of sporting event or recreational activity...mostly lacrosse where I live near Annapolis. After a good run and few hours of lax, I feel recharged and ready to go for a productive week ahead---I hope you do too. Here is a quote to get you motivated if you're dragging a bit: "Even if you're on the right track, you'll get run over if you just sit there" -Oklahoma's favorite son, Will Rodgers Ok. Wake up now. Time to get your purchase market campaign perfected. The Week That Was.... The bond market spent the week chopping around a confined...(read more) 
MBS CLOSE: Stunning Display Of Courage Under Fire"Little Engine That Could" status certainly has to go to MBS this week. Like the rest of the fixed income market, after a largely positive 2 weeks, MBS came under heavy fire today with the better than expected NFP print. When that happens, bonds of all shapes and sizes head south in a hurry, but to a much greater extent than treasuries, MBS fought back hard. What does that mean? Take a look at how MBS are definitely rallying from 1030am onward and even return to yesterday's range, whereas treasuries just seem to fizzle sideways, never coming close to even the highest yields from 3/4.... As you can see, MBS appeared to almost be playing the same sort of ball they were for the past two days, but treasuries will certainly be opening their locker to find a one way ticket back to the...(read more) 
MBS LUNCH: Recovering Price Losses After Rebound from Lows"Rate sheet influential" MBS prices have recovered from intraday lows, but not before several prominent lenders repriced for the worse. Since then current coupon MBS prices have bounced back to the initial post-NFP low price print. The FN 4.0 is currently -0-14 at 98-06 yielding 4.175% and the FN 4.5 is -0-08 at 101-04 yielding 4.376%. The secondary market current coupon is 4.306%. The current coupon yield is 61.7 basis points over the 10 year Treasury note yield and 57.7 bps over the 10yr swap rate. MBS yield spreads are 5 bps tighter vs. benchmarks today. In the chart above I called attention to the price levels at which most lenders published rate sheets this AM. I also pointed out where several prominent lenders repriced for the worse. Given the 6 tick turn around from 100-28...(read more) 
MBS ALERT: REPRICES FOR THE WORSE POSSIBLEThe FN 4.0 is -0-19 at 98-00 yielding 4.192% and the FN 4.5 is -0-17 at 100-28 yielding 4.405%. The secondary market current coupon is 4.33%. The current coupon yield is 63.5 basis points above the 10yr note yield and 59.4bps over the 10 yr swap. While many lenders hit rate sheet rebate by about 30bps at the open, not all desks cushioned pricing. Since the initial knee jerk reaction move lower, MBS prices have fallen further and a REPRICE FOR THE WORSE is possible. I already saw one of the GSEs reprice by another 25bps after the data was released. Looking ahead, I am hopeful the FN 4.5 will find support at the100-28 pivot (that was my pre-payrolls target). 3.68% is our next level of support in 10s....(read more) 
36,000 Jobs Lost in February. Unemployment Rate Holds at 9.7%. Snow Effect Unseen36,000 jobs were lost in February according to the Bureau of Labor Statistics. The unemployment rate held steady at 9.7%. The payrolls number was MUCH BETTER than expected. The unemployment rate beat forecasts by 0.1%. FEB NONFARM PAYROLLS -36,000 (CONSENSUS -50,000) VS JAN -26,000 (PREV -20,000) FEB JOBLESS RATE 9.7 PCT (CONS 9.8 PCT) VS JAN 9.7 PCT (PREV 9.7) FEB AVERAGE HOURLY EARNINGS ALL PRIVATE WORKERS +0.1 PCT (CONS +0.2) VS JAN +0.2 PCT, TO $22.46 VS JAN $22.43 FEB YEAR-ON-YEAR AVERAGE HOURLY EARNINGS ALL PRIVATE WORKERS +1.9 PCT FEB AVERAGE WORKWK ALL PRIVATE WORKERS 33.8 HRS (CONS 33.7) VS JAN 33.9, FACTORY 39.5 VS 39.9, OVERTIME 2.6 VS 2.8 FEB FACTORY JOBS +1,000 (CONS -15,000) VS JAN +20,000 (PREV +11,000) FEB GOODS-PRODUCING JOBS -60,000, CONSTRUCTION -64,000 FEB PRIVATE SERVICE...(read more) 
MBS OPEN: Stocks Edge Higher. Rates Up Ahead of DataAhead of 830am Nonfarm Payrolls and Unemployment data.... Stock futures are higher.... The 3.625% coupon bearing 10 year TSY note is -0-02 at 100-03 yielding 3.614%. The FN 4.0 is -0-02 at 98-18 and the FN 4.5 is +0-00 at 101-13.... Nonfarm payrolls are expected to print at -50,000. The consensus unemployment rate is 9.8%. Winter weather is expected to cause a temporary contraction in payrolls. READ MORE Tic toc tic toc.......(read more) 
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