MBS RECAP: Modest Gains Belie Profoundness of Pain for Mortgages

The blood-letting in MBS continued today in terms of price gains relative to broader rates markets.  For instance, 10yr Yields were roughly 6 bps lower than yesterday's close and 5bps better than yesterday's open--a healthy improvement on any day.  MBS, on the other hand, merely trickled out in line with yesterday's opening levels in Fannie 3.0s and fared even worse in Fannie 3.5s.  It's normal for lower coupons to gain more ground when longer duration debt gains more ground overall (like 10 and 30yr Treasuries falling more in yield vs 2-5's --aka 'yield curve flattening'), but it's not common for MBS to languish so badly behind Treasuries unless something is seriously wrong.  Fortunately for the sake of logic, something is seriously wrong (discussed in more detail this morning), and unfortunately for the state of rate sheets, it's a legitimate concern, taking a legitimate toll.  Indeed, we are witnessing the markets adjust not only to the potential shift in broader rates markets, but also to the adjustment of future Fed purchase expectations.  If there's any saving grace near term, Friday morning is our only shot and any meaningful improvements in the meantime look like they'll require a relatively immense Treasury rally. 

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 4:05 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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2:12PM  :  ALERT ISSUED: Slight Volatility in MBS After Beige Book

The Beige Book report isn't typically much of a market mover, and today is no different, but MBS and Treasuries were already off their best levels of the day heading into the data. There hasn't been a pronounced response to the release, but we have seen a bit of shakiness in MBS, which seem to be eyeing the 2.10 level in 10yr yields.

This was true before today and has been reinforced by the trading so far. If 10's break much higher than 2.10, MBS are at risk of getting leaky into the afternoon. So far, everything is holding sideways, but after moving away from previous highs, the situation seems a bit more tense now.

Also keep in mind "pipeline control" reprice risk over the next 2.5 days. The massive amount of positive reprices are giving lenders an opportunity to fill commitment buckets and they'll likely turn off the flow when full enough. Not all lenders do this, but if you've seen that behavior in the past, assume it's a risk this afternoon and the next.

11:23AM  :  Full Risk-Off Swing Continues in MBS Favor After Shaky AM

We're now seeing the steadiest gains of the week (as opposed to Monday morning's short covering frenzy rally) after markets move through the fairly thick batch of data this morning. Although there's been more than a little disconnection in the stock lever in May, it's definitely connected so far in June and is hooking up with bond yields on a slide lower into the 11am hour.

10's are down to 2.096 and S&P's are off roughly 10 points from the open. Fannie 3.0s are up 11 ticks to 100-15 and 3.5s are up 7 ticks to 103-09. Some 'early crowd / early to act' lenders may consider a positive reprice if we hold these gains.

Live Chat Featured Comments

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Kent Mikkola #353976  :  "REPRICE: 1:32 PM - USBank Better"

Kent Mikkola #353976  :  "REPRICE: 1:32 PM - Kinecta Better"

Nate Miller  :  "REPRICE: 1:08 PM - Caliber Funding Better"

Eric Franson  :  "REPRICE: 12:52 PM - Wells Fargo Better"

Matthew Carver  :  "REPRICE: 12:49 PM - Fifth Third Mortgage Better"

Rfellner  :  "Agree with Joe. Even .25% can get you and additonal 1-2% back towards your costs. especially with the upfront being high, save your money. The recoup period will be way too long."

Ira Selwin  :  "The 'equation" may vary by lender, as not everyone prices at the same time. Depending on what the market has done since that lender last re-priced, it will vary."

Victor Burek  :  "especially on fha"

Victor Burek  :  "i do, pretty decent pricing"

Dustin McAlister  :  "anyone here using STONEGATE as a correspondant investor? "

Joe Daquino  :  "David, if you want to ONLY bring in your 3.5% down payment than you need to lock in a rate that has enough credit to cover your closing costs & reserves for taxes&insurance. Difference in payment between .125% in rate is minimal and personally I would recommend to my client to take the higher rate with more lender credit."

David Reta  :  "is there some ballpark equation that a certain point gain might equate to an 1/8 decrease of a rate"

Jason Anker  :  "FHA is 3.75% territory right now and up 9 wont change much. others here can feel free to correct/disagree but my FHA rates are on point 99.9% of the time"

john gonzalez  :  "REPRICE: 11:50 AM - Flagstar Better"

Rob Clark  :  "REPRICE: 11:48 AM - Provident Funding Better"

Tom Schwab  :  "REPRICE: 11:47 AM - Franklin American Better"

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