MBS RECAP: Relative Stability + Moderate Losses = MBS Fighting Back

Posted To: MBS Commentary

Perhaps more than any other day in the past few weeks, today stood as an example of the mortgage market's ability to put up a fight when the time is right. As we've discussed frequently, they've been getting pummeled by Treasuries as the latter's yields fell to new multi-year lows. MBS prices are at multi-year highs, to be fair, but in an underwhelming way compared to what's been going on in Treasuries. Our thesis was that the mortgage market needed TIME and STABILITY from the bond market, and it could work with one at a time if need be. If bonds could manage to weaken a bit, but not too much, that would be a bonus. Today, then, delivered on the the "stability" side of the equation with yields trading their narrowest range in more than 2 weeks and ticking that…(read more)

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MBS RECAP: Relative Stability + Moderate Losses = MBS Fighting Back
MBS RECAP: Relative Stability + Moderate Losses = MBS Fighting Back

Mortgage Rate Weirdness May Be Working in Your Favor Today

Posted To: Mortgage Rate Watch

Things have been weird enough for mortgage rates recently that we were forced to add a ” Temporary Note on Mortgage Rate Inconsistency ” to our daily coverage recently. It will likely return before too long, but with a few edits for clarity. Edits will also need to account for days like today, which offered a prime example of how the inconsistency can be corrected. There’s a decent chance those first 3 sentences are confusing and/or relatively meaningless, so let’s change that! Mortgage rates aren’t the only rates out there. They exist in an ecosystem with more established players like US Treasury yields. They move so much like Treasury yields that even very smart people mistakenly believe Treasuries (specifically, the 10yr) dictate mortgage rates. Recently though, mortgage rates have moved…(read more)

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Mortgage Rate Weirdness May Be Working in Your Favor Today
Mortgage Rate Weirdness May Be Working in Your Favor Today

MBS Day Ahead: How Low Can We Go? And Why Mortgage Rates Can't…

Posted To: MBS Commentary

10yr yields rallied aggressively yesterday, and for no reason more compelling than a proverbial "snowball rally compounded by technicals and algorithmic trading." Ugh! I hate typing that stuff. It's annoying to be forced to reduce market movement to what feels like a "couldn't come up with anything better" type of explanation. We could also say that yesterday was the market's way of "giving up" after stocks were unable to sustain a bounce back from their rout on Wednesday. A surge lower in European bond yields didn't hurt either. If yields can so casually blast below 1.50%, it begs the question of how low we can go. The answer is complicated, to be sure. Certainly, we already know 10yr yields can go to 1.32%. They've done that before. We can…(read more)

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MBS Day Ahead: How Low Can We Go? And Why Mortgage Rates Can't…
MBS Day Ahead: How Low Can We Go? And Why Mortgage Rates Can't…

MBS RECAP: Mortgage Market Starting to Play Like it Wants to Stay In The Game (Finally)

Posted To: MBS Commentary

Bonds digested the week's busiest day of economic data, by far, today. But markets in general are only interested in data that changes the economic narrative. Today's only real candidate in that regard would have been a surprisingly weak Retail Sales report. Since we didn't get that (it was stronger), bonds underwent a token sell-off and were quickly right back to paying attention to other things. Europe volunteered to be one of those "other things" today with talk of central bank stimulus from an ECB official. There were also a few blows traded in the trade war saga with China vowing "countermeasures" and Trump tweeting that any trade deal had to be on "our terms." No game changers there, but they certainly didn't hurt bonds. The afternoon saw…(read more)

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MBS RECAP: Mortgage Market Starting to Play Like it Wants to Stay In The Game (Finally)
MBS RECAP: Mortgage Market Starting to Play Like it Wants to Stay In The Game (Finally)

Mortgage Rates Fall Back Down to 3-Year Lows

Posted To: Mortgage Rate Watch

Mortgage rates fell today as the underlying market for mortgage-backed-securities (MBS) actually did a better job of keeping pace with broader bond market gains–not something they’ve been doing very well lately! For some lenders, it was enough to get them back to August 6th’s levels, which were the best in nearly 3 years. The average lender can quote a conventional 30yr fixed rate of 3.625% for top tier scenarios. That said, there is much more variability between lenders at the moment. Take a look at the ” Temporary Note on Mortgage Rate Inconsistency ” below to learn more about why things have been volatile and inconsistent. There’s no reason to expect broader market volatility to suddenly disappear, but as long as Treasury yields don’t undergo a massive spike, the mortgage market should…(read more)

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Mortgage Rates Fall Back Down to 3-Year Lows
Mortgage Rates Fall Back Down to 3-Year Lows

MBS Day Ahead: Active Day For Data

Posted To: MBS Commentary

In the day just passed, bond markets primarily reacted to overseas economic data with many of the reports in Europe coming in flat to weaker. Combined with the weakest Chinese manufacturing data in years, it was enough to push bonds through recent resistance levels and to new low yields since 2016. The domestic hours were especially influenced by a massive drop in equities. In the day ahead, we'll get the biggest slate of domestic economic data of the week, led by Retail Dales and Philly Fed at 8:30am. The consumer spending sector is arguably the last bastion of economic health in the US along with stable employment numbers. Any cracks in Retail Sales would thus be a big deal whereas an unexpected surge might not do too much to hurt bonds given the laundry list of other concerns. That's…(read more)

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MBS Day Ahead: Active Day For Data
MBS Day Ahead: Active Day For Data

MBS RECAP: Have You Heard The One About Mortgage Underperformance?!

Posted To: MBS Commentary

Living under a rock has a lot of advantages: generally low housing cost, durability, no roof maintenance, and if you're strong enough, you have something to throw at anyone who approaches your castle in a threatening way. The disadvantages may be slightly more numerous, but I can only really think of one right now: the lack of access to timely market-related news! All that nonsense to say: unless you've been living under a rock, you've probably heard or seen that mortgage rates and/or MBS are doing an absolutely lousy job of keeping pace with the move in the Treasury market. Even from under said rock, you could still probably hear other people whining about this dynamic, so you really have no excuse not to know. Despite our knowledge of this general phenomenon, reality is still…(read more)

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MBS RECAP: Have You Heard The One About Mortgage Underperformance?!
MBS RECAP: Have You Heard The One About Mortgage Underperformance?!

Mortgage Rates Are a Mess!

Posted To: Mortgage Rate Watch

Mortgage rates were unchanged for many lenders today which is utterly and completely shocking given the other market developments that tend to coincide with rates moving lower. Specifically, stocks tanked and 10yr Treasury yields plummeted to the lowest levels since September 2016. For anyone under the impression that 10yr yields dictate the direction of mortgage rates without exception, it’s high time to reassess that worldview. The bottom line is that rates are doing an absolutely terrible job of keeping pace with the rally in the broader bond market. The ” Temporary Note on Mortgage Rate Inconsistency ” below will be informative in that regard. With that in mind, many lenders were unchanged today for slightly less complicated reasons. Sure, underlying mortgage bonds didn’t improve as quickly…(read more)

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Mortgage Rates Are a Mess!
Mortgage Rates Are a Mess!

MBS Day Ahead: Suddenly, Bonds Are Pretty Sure The Global Economy is Doomed

Posted To: MBS Commentary

In the day just passed, bonds sold off by a completely average amount in the context of recent volatility and new trading range. Motivations were above-board and easy to confirm (trade war headlines). The move was mirrored in stocks and other assets. Bottom line: as far as moderately-paced sell-offs are concerned, this one was totally boring. The overnight session was less boring with a slew of flat-to-weaker economic data around the globe. It prompted a gradual rally at first, followed by a sharp rally bringing yields to new long-term lows before the open. In the day ahead, traders who haven't figured out what's going on yet will continue to scratch their heads and try to piece together the new reality. Actually, it's an old reality that has simply been coming into focus by increasing…(read more)

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MBS Day Ahead: Suddenly, Bonds Are Pretty Sure The Global Economy is Doomed
MBS Day Ahead: Suddenly, Bonds Are Pretty Sure The Global Economy is Doomed

MBS RECAP: Old Friend Spoils What Might Have Been a Calm Day

Posted To: MBS Commentary

Bonds began the day in relatively unchanged territory versus yesterday's close and soon encountered the slightly stronger CPI data (2.2 vs 2.1% for CORE CPI). This gave the appearance of selling pressure for a few minutes, but as expected, it was mild and temporary. In fact, 10yr yields and MBS were at their best levels of the day less than an hour later. 2yr yields, however, didn't see the same sort of bounce. One might argue that the CPI data is only important inasmuch as it failed to give the Fed a clear green light to cut by 50bps at the next meeting (something a lot of people think might actually happen). The 2yr weakness combined with the 10yr recovery brought the yield curve dangerously close to 0.00…. a level that doesn't matter in the slightest except that a lot of people…(read more)

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MBS RECAP: Old Friend Spoils What Might Have Been a Calm Day
MBS RECAP: Old Friend Spoils What Might Have Been a Calm Day