Posted To: MBS Commentary

Though MBS were not quite as thinly traded as treasuries (lowest volume since the first trading day of 2010), the picture wasn't much better. At least that which is at risk on low volume days--volatility due to the trading that actually happens comprising a larger portion of the total--was not present. Quite the opposite in fact, as the the same trend that began to emerge early this afternoon remained intact through the close. In MBS, the 101-07 to 101-10 range covered almost everything since 1030 AM. That's a quiet, boring day. I move a lower trendline down to 3.57 on the 10yr yield to show that we're going out today at an even lower yield level than Friday. So don't let the entire day of slightly worse readings fool you... The net effect for both markets was FLAT. And in the...(read more)

Posted To: Voice of Housing

Mr. O’Reilly (December 01, 2009) claims that the “new” root cause of the housing crisis is the (lack of) “jobs, jobs, jobs.” So the solution to the crisis must be (the creation of) “jobs, jobs, jobs.” I agree. But the next question is this: What sort of jobs? Consider a proposal for two, complementary jobs programs. The first is called the “Litter Scattering Brigades.” Workers are paid to strew trash along the nation’s highways. The second jobs program is called the “Litter Gathering Brigades.” Workers are paid to collect the trash strewn on the nation’s highways. The workers of the Scattering Brigade have jobs, and thus can afford a home. The workers of the Gathering Brigade have jobs, and thus can afford a home...(read more)

Posted To: The Garrett Watts Report

This was the half time scene in Miami last night at Super Bowl XLIV... I am sure many watchers were thinking: Why The Who? Maybe some of us in our 60s and 70s need to be “put out to pasture” or start “whittling wood” on the front porch. However, as a boomer, I was inspired to see these guys still rocking and rolling. I enjoyed the music and hope they keep playing. Peter Townsend will go down as one of most brilliant musical writers of all time. That’s enough about The Who and dating myself. Lets’ talk about secondary market and locking loans. One of the areas we review during our FOCIS-plus Studies is whether a company has a centralized lock process. Centralizing the lock function means all lock requests and confirmations are managed by a “gate keeper”...(read more)

Posted To: MBS Commentary

The market is duller than a Colts victory parade at the moment. We're dealing with a fairly standard issue "calm before the storm" that we often see on a data-limited Monday when the rest of the week contains the more significant events. The supportive trends we began to note in the last post have continued to foster a narrow range of prices with almost perfectly flat directional movement. In other words, the simple existence of a "narrow range" doesn't always mean prices aren't moving. We can see narrow ranges while still moving DIRECTIONALLY. For instance, even on a 16 tick rally, if the subsequent highs and lows are only a tick or two higher than their previous marks, the line on the chart would be fairly smooth yet still be very much higher at the end of...(read more)

Posted To: MBS Commentary

As AQ pointed out this morning, today's slightly downward trend in MBS price began in the final hours of Friday's trading. Both MBS and Treasuries put in their best marks of the day just before 2pm, and have moved steadily downward ever since. You may notice, however, that both markets appear to be losing that negative steam near current levels. For Treasuries, that looks to be around 3.60 and for MBS, around 101-08. At the moment, the Fannie 4.5 is a tick higher than that at 101-09, but is still 5 ticks lower from Friday's closing prices. All that being said, the more important trends to watch pertain to the generally supportive range for MBS that emerged even before Friday's boomy rally. AQ pointed this out as well, and it remains pertinent at the moment. You can see on Thursday...(read more)

Posted To: Mortgage Rate Watch

Who Dat!!!! Congratulations to New Orleans on a well played and exciting Super Bowl victory. Mortgage rate moved a few basis points lower on Friday following the Employment Situation Report . While we have seen scattered day over day streaks of improvements, mortgages rates have failed to fall lower than 4.75% in 2010. To remind readers, as mortgage-backed securities prices move higher in price lenders are able to pass along better rates. After what seemed like a steady flow of important economic data and market moving headline news last week, the data schedule slows down in the days ahead, but headline news is always a possibility. In terms of scheduled events, no economic reports are being released today or tomorrow. On Tuesday we have the first of three mortgage rate influential Treasury...(read more)

Posted To: MBS Commentary

DID I MENTION THUNDER SNOW ! By the look of the charts, it doesnt appear that we should be expecting any noticeable improvements in positive price momentum today. We are extending the downtrend that began midday Friday. The FN 4.0 is -0-08 at 98-08 yielding 4.169% and the FN 4.5 is -0-05 at 101-08 yielding 4.375%. The secondary market current coupon is 2bps higher on the day at 4.313%. The current coupon yield is 72.4 bps over the 10yr TSY note yield and 62.6 bps over the 10yr swap rate. MBS yields are moderately tighter vs. benchmark yields this morning. The 3.375 coupon bearing 10 year TSY note is -0-06 at 98-06 yielding 3.594% (+2.3 bps from 5pm marks on Friday). The 2s/10s curve is unchanged at the 280bp pivot. The dollar index is weaker vs. a basket of currencies....-0.37% at 80.145. The...(read more)

Posted To: Pipeline Press

I thought about taking today off from the commentary to celebrate, since yesterday I won all 4 quarters of my office's Super Bowl pool! And then I remembered that I was the only one in the pool, don't really have an office, and that the net effect of my $50 a square winnings was about the same as the US Government buying back their own securities. Oh well. Those dues that you pay to the Mortgage Bankers Association - where does the money go? Education, lobbying, etc., but some probably went into buying the MBAA its $90 million headquarters in downtown Washington which it sold last week for $41 million after 3 years. Ouch! CoStar Group, who is moving its headquarters from Maryland to DC, also received a $6 million property tax break - hats off to them. Not only did the MBAA's interest...(read more)

Posted To: MBS Commentary

Good Morning. Congrats to the Saints. Here is a recap of my weekend.... We had a blizzard...32 inches of THUNDER SNOW . The driveway was defeated with snowblowers. This is only the first half of the driveway by the way.... The CAPS came from behind to beat the pens. Ovie had a trick plus the game winning assist in OT. Thats 14 in a row for the C-A-P-S CAPS CAPS CAPS. Troy saw his shadow. AH! Six more weeks of football. The Saints won....then my milkaholic ex-gf Lindsay came over. Phew. I am zonked. What a weekend. Stocks sold off in a panicky fashion last week as sovereign debt concerns grew over Greece, Portugal, and Spain's ballooning budget deficit and rising borrowing costs. If a coordinated global recovery is to remain on course, one has to assume some sort of financial intervention...(read more)

Posted To: MND NewsWire

The week ahead is a particularly slow one. The only major releases are the Trade Balance on Wednesday and Retail Sales report on Thursday. Plus, Friday will see February’s first measure of consumer confidence. With little fresh data to anticipate, the fear is that markets will continue on their downward path this week. Since January 19 the Dow has shed 5.6% while the S&P 500 has lost 6.9%. One hour before the opening bell, however, equity markets are looking stable. Dow futures are up 10 points to 10,012 and S&P 500 futures are up 3.08 points to 1,066. Meantime, WTI Crude oil is starting the week 15 cents higher at $71.34 per barrel and Spot Gold is up $1.90 to $1,068.20. The US dollar, by contrast, is lower against the majors after hitting the highest level since the summer of...(read more)

Posted To: MBS Commentary

When something is on a doorstep--any doorstep--there are only two places it can be going: either back inside the metaphorical house, or back to the world outside. Bonds, as represented not by our namesake MBS, but by the 10yr Treasury note, find themselves in just such a dualistic state this evening. They too, are on a doorstep, their location being most perfectly defined neither by the "outside" or the "inside." when we are talking about outside versus inside, it's in reference to the range in which the 10 year treasury was trading between August 21 and December 14, 2009, "the brave old world." These four months represent a unique time in the economic history surrounding the financial crisis. it was a unique time in and of itself in that we were neither rising...(read more)

Posted To: MND NewsWire

A consumer survey conducted by Thomas Reuters and the University of Michigan indicates that it is sellers who are holding the housing market at low levels. In survey results released today, approximately 75 percent of homeowners who participated in the survey viewed current home buying conditions as favorable because of attractive home prices and low interest rates. However, nine out of ten of those home owners viewed the conditions for the sale of their own home as unfavorable, not because of lack of buyers, but because of price declines . The survey authors viewed these responses as predicting a long-term drag on the housing market for both economic and psychological reasons. There is, the report said, a significant barrier to purchasing a new home if the potential buyer's current home...(read more)

Posted To: MBS Commentary

After reaching as high as 101-20, MBS 4.5's are back down to 101-14. Its seems that layers of support are building at levels that would leave 4.5's at PAR after settlement next week. Far be it from me to suggest there's some sort of external force that continues to push 4.5's toward that 101-00 level, but it LOOKS that way on the chart at least. Meanwhile, stocks had recovered 100% of today's losses, though with the close still 20 minutes away, difficult to say where things will end. As for treasuries, the yield curve is reasonably unchanged on the day save for a little bulge in the belly (5's and 7's leading the pack by 2bps). All told, the stock lever did what we wanted it to do in the case of a stock sell-off today, and as stocks have rallied, little of what we...(read more)

Posted To: Voice of Housing

The nation’s capital is quickly shutting down, now that forecasters are calling for one to two feet of snow overnight. Local authorities warn residents to prepare to “shelter in place” for three days. Expect housing-minded Washingtonians to be hunkered down in their homes this weekend huddled around the fire reading the Obama Administration’s proposal for the future of Fannie Mae and Freddie Mac. Oh wait, that long-awaited plan didn’t materialize this week. ( READ MORE ) Already some folks are taking shots at the Administration for not coming through with new ideas as promised for how to deal with the two housing GSEs. But is that fair? Frankly, a reengineering of the secondary market is going to take some serious time . And brains. It’ll require some of...(read more)

Posted To: Mortgage Rate Watch

Mortgage rates improved a few basis points yesterday as panic set in on Wall Street. Headline news called attention to a developing crisis of confidence in the European Union where Greece, Spain, and Portugal all face ballooning budget deficits and rising government borrowing costs. Fear caused a global stock market sell off which led nervous investors to reallocate funds into what is considered to be the safest investment in the word, US Treasuries. This "flight to safety" into the bond market helped mortgage-backed securities prices move higher which allowed lenders to pass along slightly lower mortgage rates. While improvements were noted,many originators were expecting more aggressive loan pricing from lenders, but as has been the case over the past few weeks, 4.75% continues...(read more)

Posted To: MBS Commentary

Even by the time of our last commentary, it was no mystery that we got our bond-friendly eventuality today after the jobs report. That's nice, of course, but somewhere between 3.55 and 3.57, chart watchers will notice that yields held under these levels for the majority of the 2nd half of 2009. It's probable that the short term chart below is picking some of that up in where it decided to offer resistance today. The question is: will Monday confirm this test? And of course we wouldn't talk about such important long term levels without refreshing our collective memory on their validity: In deciding how likely any sort of continuation of this bond rally might be, the stock market continues to suggest itself as a good indicator of bond movements. Sure, this can change from day to day...(read more)

Posted To: MBS Commentary

The dust is starting to settle after the initial knee jerk reaction to the Employment Situation Report. Stocks are still dealing with yesterday's sovereign debt/jobs data/panic induced weakness. The S&P is currently -0.14% at 1060. The dollar is holding onto yesterday's FLIGHT TO QUALITY rally, currently +0.46% at 80.283. (Global debt fears sent funds into the safest currency yesterday...yeh THATS RIGHT..KING DOLLAR!!! Last time I quote Larry Kudlow, I promise) The 10 year Treasury note is trading above yesterday's levels. The 10yr futures contract has seen HUUUUUUUGE trading volume this morning. A nice level of support has been built in at 118-12. 118-12 is right about 3.60% in the cash market for 10 year Treasury notes. The 3.375% coupon bearing 10 year note is currently ...(read more)

Posted To: The Garrett Watts Report

We mentioned recently that Google was sitting on $24.5 billion in cash. Apple has $40 billion in cash, and even after paying out huge dividends, Microsoft still has $37 billion in the green stuff. From a friend at the FDIC: “We are doing a LOT of hiring right now, in case you want to make your readers aware. These are temporary jobs (2+ years) mainly located in So. California, No. Florida, Chicago, Dallas and some other spots here and there. These are bank resolutions jobs - closing banks and liquidating them. HERE IS THE JOBS LINK . Okay, you guys. This may be a great way to get back on the merry-go-round! Unless you think California will default on its bonds, you can buy California Lease Revenue Bonds maturing in 19 years and yielding 5.82%. Since they’re tax exempt, this is the...(read more)

Posted To: Pipeline Press

A hole has been found in a nudist camp wall - the police are looking into it. There is also a hole in Harrisburg, Pennsylvania's budget, and the city is considering filing Chapter 9 bankruptcy . (The capital of PA, with a population of 47,000, has $68 million in debt service payments this year due to the construction of a waste incinerator, which is four times more than what the city expects to raise through property taxes and $4 million more than the city's entire proposed operating budget!) Yesterday's stock market drop dominated the financial news . And a slowing economy helps rates and mortgage loan agents, right? (It's a two-edged sword.) So the markets did not pay much attention to Non-Farm Productivity increasing over 6% during the fourth quarter of 2009. Efficiency in...(read more)

Posted To: MBS Commentary

20,000 jobs were lost in January according to the Bureau of Labor Statistics. The unemployment rate fell from 10.0% to 9.7%. This will surely grab headlines... JAN NONFARM PAYROLLS -20,000 (CONSENSUS +5,000) VS DEC -150,000 (PREV -85,000) JAN JOBLESS RATE 9.7 PCT (CONS 10.1 PCT) VS DEC 10.0 PCT (PREV 10.0) JAN AVERAGE HOURLY EARNINGS +0.3 PCT (CONS +0.2) VS DEC +0.2 PCT, TO $18.89 VS DEC $18.84 JAN YEAR-ON-YEAR AVERAGE HOURLY EARNINGS +2.5 PCT JAN AVERAGE WORKWK 33.3 HRS (CONS 33.2) VS DEC 33.2, FACTORY 40.8 VS 40.6, OVERTIME 3.5 VS 3.4 JAN GOODS-PRODUCING JOBS -60,000, CONSTRUCTION -75,000 JAN SERVICE-PROVIDING JOBS +40,000, RETAIL +42,000, GOVT -8,000, CENSUS ADDED 9,000 TEMPORARY JOBS JAN AGGREGATE WEEKLY HOURS INDEX +0.3 PCT VS DEC UNCH NOV NONFARM PAYROLLS REVISED TO +64,000 FROM +4,000...(read more)

Posted To: MND NewsWire

Equity futures are deep in the red this morning after substantial losses yesterday. The culprit continues to be European sovereign debt concerns in Greece, Portugal and Spain, which is sending European and Asian stocks rapidly south. Labor data from the US isn’t helping as jobless claims unexpectedly rose to 480k yesterday. The big questions today are how did January employment perform, and what impact can it have on the markets? Yesterday the Dow fell 268 points, or 2.61%, putting the the industrial index into four-digits for the first time since early November. The S&P 500 performed even worse as it shed 3.1% ― its worst single-day decline in nine months ― effectively erasing three months of gains. “The deepening correction in stocks has now cut the Dow 6.7% from its January...(read more)

Posted To: MBS Commentary

Gotta love Jan and Feb... Fans of rhetoric finally have a window to use the phrase "of the year" and get off the hook by citing its literal accuracy. Even if MBS are only at two month highs, MBS ARE STILL AT TWO MONTH HIGHS! For reasons such as this, locking in upon determining a reasonable amount of the gains were passed through was the default advice. Of course with the Category One Facemelter characterized by the 16 tick gain, we wouldn't expect to see ALL those gains passed through to rate sheets, especially a day before NFP, but if you got even half of it, it was like a glorious and unexpected gift. And EVEN IF RATES GET BETTER TOMORROW, I don't remember the last time we had the opportunity to lock the best rates in nearly two months on the afternoon preceding NFP. So...(read more)

Posted To: Mortgage Rate Watch

Mortgage rates extended their streak of moving sideways near the most aggressive levels of the year yesterday. Although prices of mortgage backed securities were moderately weaker at the end of the day, lenders were not forced to reprice for the worse, leaving rates unchanged at the end of the day but marginally worse than the previous day. All was generally quiet in the interest rate market....until today. First out this morning were Weekly Jobless Claims, released by the Department of Labor at 8:30am. This report gives us three measures on the number of Americans who filed for first time unemployment benefits in the previous week. Since our economy is driven by consumer spending, higher unemployment leads to less spending which is a negative for the stock market and generally supportive of...(read more)

Posted To: MBS Commentary

As stock traders prepare to head home, with hat in hand and tail firmly stuck between legs, both benchmark Treasuries and "rate sheet influential" MBS coupons are trading near their most aggressive levels of the day. The MBS NINJA just sent me his comments on the day: Another day has passed by with MBS largely on the sidelines, as the actions around the globe (both in bonds and stocks) largely failed to include mortgage-backed securities. As treasuries got a huge “flight to quality” boost from the doings and undoings in the Mediterranean Sea (and countries bordering said body of water), MBS was much more pedestrian while the market sits and anxiously waits prepays in another hour or so. Not much can be gained on this market as yield spread are as tight as they have been...(read more)

Posted To: MND NewsWire

The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS). In the week ending February 3, 2010, the Federal Reserve purchased a total of $17.63 billion agency MBS. In those five days the Federal Reserve sold $5.63 billion (supported the roll market) for a net total of $12 billion MBS purchases. The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers. Since the inception of the program in January...(read more)