MBS Day Ahead: MBS Have Followed Treasuries, But Rates Haven't Followed MBS

Posted To: MBS Commentary

Today is the lightest of the week in terms of scheduled market movers on the econ calendar (there really aren't any to speak of unless you count the New York ISM data and we barely do). In addition, bonds are fairly flat in the bigger picture. Point being: we're waiting on inspiration , and we're not even sure where it will come from. The best guess on the inspiration front is that next Wednesday's Fed announcement will bring some more meaningful trading both before and after, but it's more than a week away. In the meantime, we can watch the same ranges we've been watching. 10yr yields remain squarely range-bound after breaking below the uptrend that had been intact for more than a month. As I said yesterday, we should view that breakout as a vote to remain in the range…(read more)

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MBS Day Ahead: MBS Have Followed Treasuries, But Rates Haven't Followed MBS
MBS Day Ahead: MBS Have Followed Treasuries, But Rates Haven't Followed MBS

Mortgage Rates Start Higher But Finish Lower

Posted To: Mortgage Rate Watch

Mortgage rates pulled off a repeat performance of last Friday’s intraday drama. The average lender began the day in higher territory as bond markets were weaker in the morning. Bonds recovered nicely and mortgage lenders were more than willing to adjust rate sheets accordingly. After being in slightly weaker shape compared to Friday’s latest levels, the average lender was noticeably better than Friday by the end of the day. What does “noticeably better” look like in objective terms? Depending on your existing rate and scenario, it might not look like much. The industry is pecking away at an all-time low rate range. Progress at these levels will continue to come in bits and pieces. Most prospective borrowers would see this change in the form of lower upfront costs to the tune of 0.1-0.2% of…(read more)

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Mortgage Rates Start Higher But Finish Lower
Mortgage Rates Start Higher But Finish Lower

MBS RECAP: Timing of Today's Volatility Could Create Some Opportunity

Posted To: MBS Commentary

There’s no way to predict the future for rates and markets, but there are occasionally tactical opportunities. Today’s version involves lenders being forced to price rate sheets when MBS had just swung down to the lowest levels of the day. Prices have since bounced. If they were to hold here, lenders have 2 choices: offer improved pricing this afternoon or tomorrow morning. Econ Data / Events 11:30-11:50 AM (ET) – Fed 30yr UMBS Buying ISM Manufacturing: 43.1 vs 43.6 f’cast, 41.5 prev Market Movement Recap 10:06 AM: Flat at roughly unchanged levels out of the gate, then MBS tanked (moderately) and Treasuries tanked modestly. A portion of that weakness has been recovered in MBS, but Treasuries remain near higher yields. 12:31 PM: Treasuries jumping in with some gains of their own now at the end…(read more)

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MBS RECAP: Timing of Today's Volatility Could Create Some Opportunity
MBS RECAP: Timing of Today's Volatility Could Create Some Opportunity

MBS Week Ahead: Can Bonds Confirm The Breakout?

Posted To: MBS Commentary

A resilient performance at the end of last week means that bonds have easily staked a claim to a sideways range that's been intact for more than 2 months now. We had been following a slightly negative trend in Treasuries (seen in the yellow lines below), but even that trend was completely contained by the prevailing sideways range. As of Friday, 10yr yields were making a case to part ways with the negative trend by ending the day below the yellow line for the first time since the trend began in mid April. The bottom portion of the chart has a slow stochastic oscillator–a technical overlay that helps track momentum. As far as stochastics are concerned, negative momentum topped out and reversed course last week, but there's a catch. There are two catches actually. First off, stochastics…(read more)

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MBS Week Ahead: Can Bonds Confirm The Breakout?
MBS Week Ahead: Can Bonds Confirm The Breakout?

Mortgage Rates Stage Nice Comeback, But Uncertainty Remains

Posted To: Mortgage Rate Watch

Mortgage rates staged a nice little comeback today, moving back toward the all-time lows seen late last week. Mortgage rates are determined primarily by the bond market, and the bond market benefited from strong demand at the end of the month. Higher demand means higher prices, and higher bond prices equate to lower rates. There has been some concern that the overall bond market (which includes mortgage-specific bonds as well as benchmarks like US Treasuries) was gradually moving toward higher rates in the past few weeks. As of today, however, 10yr Treasury yields (the most quintessential benchmark for longer-term interest rate momentum) improved for a third straight day. This went a long way toward arguing against the recent, gentle uptrend in rates but fell short of suggesting a big drop…(read more)

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Mortgage Rates Stage Nice Comeback, But Uncertainty Remains
Mortgage Rates Stage Nice Comeback, But Uncertainty Remains

MBS Day Ahead: Bonds Look to Challenge Trend With Powell on Deck

Posted To: MBS Commentary

The next Fed announcement is 1.5 weeks away and so it's time to start ramping up expectations for the details of the Fed's official QE announcement. But wait… Aren't they buying a ton of bonds already? Indeed, the Fed continues purchasing both MBS and Treasuries in relatively significant quantities every day, but they do so under "emergency measures." Markets expect the Fed to make it official in this upcoming meeting. Why is that? The Fed is committed to transparency. For anyone who tuned in very much to the pre-Bernanke Fed communications, this is a bonafide fact . They're also committed to ensuring smooth market functioning as the economy battles back from coronavirus impacts. Under the current emergency policy, markets are left to guess how and when the daily…(read more)

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MBS Day Ahead: Bonds Look to Challenge Trend With Powell on Deck
MBS Day Ahead: Bonds Look to Challenge Trend With Powell on Deck

Mortgage Rates Have Already Risen From All-Time Lows (But Only Slightly)

Posted To: Mortgage Rate Watch

It’s Thursday, and thus time once again for Freddie Mac’s weekly mortgage rate survey. This is the longest-running and most widely-cited snapshot of mortgage rates in the US, but it frequently results in misinformation for mortgage shoppers . The survey does an accurate job of capturing the rates available early in any given week, but it doesn’t take the entire week into consideration. As such, actual rates can be very different by the time the survey is published (and news organizations are citing it as a breaking story). This is most noticeable when rates make huge moves late in any given week or simply when rates are near all-time lows . In the current case, the average lender was at all-time lows late last week when Freddie’s survey wasn’t accepting any responses. It’s no surprise to see…(read more)

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Mortgage Rates Have Already Risen From All-Time Lows (But Only Slightly)
Mortgage Rates Have Already Risen From All-Time Lows (But Only Slightly)

MBS Day Ahead: Why We're Watching Treasuries

Posted To: MBS Commentary

The market reaction to coronavirus made a mess of the relationship between Treasuries and MBS (and between MBS and mortgage rates for that matter). These disconnections can happen from time to time and when they do, we stop following trends in Treasuries and focus on MBS. In fact, the disconnection between MBS and mortgage rates forced me to stop following MBS except inasmuch to be on the lookout for a reconnection. While we may see a bit of small scale disconnection between Treasuries and MBS in the short-term, it won't be big enough to suggest we tune-out Treasuries again. The time has clearly come to get back to the business of following Treasuries, even though our focus is on mortgage rates. If you haven't read my primer on this before, here's why we do that. And if you prefer…(read more)

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MBS Day Ahead: Why We're Watching Treasuries
MBS Day Ahead: Why We're Watching Treasuries

MBS Day Ahead: Rising Rate Trend Intact, But Motivation is Required

Posted To: MBS Commentary

Today's first chart shows the trend we've been following in 10yr Treasury yields. It is pointed in an unfriendly direction (i.e. "up"), but at a fairly gentle pace in the bigger picture. Even then, such trends are by no means crystal balls. At best, they can provide some lines on either side of whatever road we're currently on. With that in mind, we'd reached the lower end of the range last Thursday and had begun to bounce by Friday. Now this week, the first two trading days are confirming the bounce (unless today's losses fade). The reassuring part of today's weaker performance so far is that it has required some specific motivation. In other words, bonds haven't moved to higher yields simply because this trend says they are supposed to. In today's…(read more)

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MBS Day Ahead: Rising Rate Trend Intact, But Motivation is Required
MBS Day Ahead: Rising Rate Trend Intact, But Motivation is Required

Mortgage Rates Moving Higher to Start New Week

Posted To: Mortgage Rate Watch

Mortgage rates hit new all-time lows last week. In fact, for many lenders, records were broken on more than one day. That raised the risk of a bounce back this week and if today is any indication, that’s what we’re seeing. The average lender is back in line with last Tuesday’s rate offerings for top tier conventional 30yr fixed scenarios. All that having been said, rate movement is pretty minimal by normal standards as the bond market (which underlies interest rate momentum) has been relatively calm and sideways after coming to terms with the initial shock of the coronavirus market impact. In many cases, borrowers would see the same note rate they saw last Friday (in those cases, the upfront costs associated with that rates would likely be slightly higher). Loan Originator Perspective Bonds…(read more)

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Mortgage Rates Moving Higher to Start New Week
Mortgage Rates Moving Higher to Start New Week