MBS RECAP: Friday Afternoon, Post Payrolls Weakness Detracts From Facemelter

How Green Was My Rally?  Apparently not as green as it was...  This morning's gains took MBS into undisputed facemelter territory with Fannie 3.0s packing on more than a point of improvement from lows to highs.  Even now, we're still up nearly half a point on the day which is better than most "up" days.  But between now and then, there's been no massive market moving event--nothing, in fact, to inform the weakness other than a characteristic lack of participation following Non-Farm Payrolls on a Friday afternoon.  A case could be made for bond markets shying away from a more aggressive rally in light of the big-ticket events coming up next week.  In this case, the technical stopping point for today's rally makes decent sense.  1.61 was certainly on the radar as a pivot point and although 10's broke into the 1.5's today, the reversal really happened around 1.61 with more bounces off that level than any other near the low yields of the day.  Whether it's technical or simply incidental doesn't much matter.  A big bullet was dodged in that a stronger NFP would not only have hurt MBS Prices TODAY, whereas the miss on the data delays that potential hurt until next week's Fed meeting.  As it stands now, QE expectations are generally ramped up following today's data.  WSJ's Hilsenrath specifically mentions MBS as a likely part of the announcement.  If they're included, we'll have dodged most of the big-ticket bullets with Wednesday's German court ruling and subsequent reaction (which could take days and weeks) being the other biggie on the radar.

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

Pricing as of 4:07 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.

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12:50PM  :  ALERT ISSUED: Leakage Continues Unfortunately Adding To Reprice Risk

Although there's no volume behind it and despite the fact that we generally see MBS entering into a sideways grind above 103-20, we've moved far enough away from the prices that prevailed at rate sheet time to begin being slightly wary about negative reprices.

The hugeness of the morning rally makes it easy to overlook that we're actually 11 ticks off the highs and more than 4 ticks lower from the very lowest prices that prevailed from 9:20am to 10:30am. There are past examples of similar rally days where similar leakage has seen a few lenders reprice negatively, so just a heads up to keep that in mind.

Officially, nothing much is happening. Volume remains low and prices remain in line with the first "ledge" achieved about 10 minutes after the NFP rally--the ledge upon which further gains were built. So being back to said ledge doesn't much bother us, especially on a Friday afternoon, but it could bother a lender or two at current levels--more so if we start testing 103-20.

Live Chat Featured Comments

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Chris Kopec  :  "REPRICE: 3:45 PM - Caliber Funding Worse"

Tom Schwab  :  "REPRICE: 3:34 PM - Flagstar Worse"

Benjamin Payne  :  "REPRICE: 3:06 PM - Provident Funding Worse"

Justin Dudek  :  "REPRICE: 2:41 PM - Everett Financial Worse"

Paul L. Martin  :  "REPRICE: 2:06 PM - Suntrust Worse"

LSP  :  "REPRICE: 2:01 PM - PennyMac Worse"

LSP  :  "REPRICE: 1:59 PM - Franklin American Worse"

MC  :  "REPRICE: 12:56 PM - Flagstar Worse"

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