Category Archives: Home builders

MBS RECAP: Slowest Day of The Year for Bonds

Posted To: MBS Commentary

How’s that for an exciting headline? At least it’s an ” extreme ,” technically–just not the sort of extreme that would pique our interest (but still better than the extremes that would peak our interest rates)! Seriously though, trading volumes were easily the lowest since the December 2016 holiday season. Talk turned to political headline risk with Kushner testifying in a closed Senate session today and Manafort/Trump Jr. set for more closed-door questioning in the coming days. The fading of the last-2016 “Trump trade” has been one of the supportive themes helping bond markets push back toward lower rates. To whatever extent this week’s political headlines cast more doubt on the administration’s efficacy (or conversely, if they put those fears to rest)…(read more)

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MBS RECAP: Bonds Extend Gains in Super Quiet Conditions

Posted To: MBS Commentary

As expected, today could be better characterized as a highly-regulated narcotic sleep aid than an interesting trading day for bond markets. The dreams were sweet, at least, with 10yr yields drifting down to their best levels of the month–just under 2bps lower at 2.238% Fannie 3.5 MBS were up by an eighth of a point in the afternoon, but pulled back just a bit by the close. Lenders passed along at least as much in terms of price improvements (day over day), so it’s hard to take exception to the lack of interesting data. Bored market-watchers could discuss things like the death cross in 10yr yields (as in the attached video), or ponder the importance of political headlines (Spicer resignation… hint: not a market mover). If anything the noticeable (and I use the term very loosely) upticks…(read more)

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MBS RECAP: Markets Had ECB Almost Perfectly Pegged

Posted To: MBS Commentary

Talk about your anticlimactic conclusions! It’s not that the European Central Bank (ECB) was likely to make any meaningful changes in its policy stance today, but it nonetheless served as an important opportunity to confirm or deny the notion that Draghi’s late June comments were a step in the direction of a tapering announcement–perhaps later this year. Draghi essentially denied it–saying they hadn’t even discussed the September meeting as a tapering announcement target, nor had they discussed it at all. That may or may not be factual. Certainly, we’ve seen newswires that suggest quite the opposite, such as this one from July 13th that did noticeable damage to bond markets: ECB COULD ANNOUNCE PLANS TO WIND DOWN QE AT ITS SEPT. 7 POLICY MEETING–ECB OFFICIALS Technically though…(read more)

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MBS RECAP: Eerily Quiet Ahead of Central Bank Announcements

Posted To: MBS Commentary

Much has been made of tomorrow’s European Central Bank (ECB) Announcement, mainly because of its proximity to ECB President Draghi’s comments on June 27th. That’s when Draghi said deflation was being replaced by reflation and that economic growth in the Eurozone has more upside risk than downside. Those are the words of a central banker who is sending up trial balloons for tapering. Bernanke sent up similar balloons in March 2013, but they were ignored due to an abrupt shift in economic data in April (and then suddenly recalled in alarming fashion when that data was heavily revised in May). Markets are much more alert about ECB tapering risks and they’ve reckoned it’s not happening in any sort of sweeping fashion just yet. Draghi’s late June comments threw traders for…(read more)

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MBS RECAP: Best Day For Bonds Since Late June

Posted To: MBS Commentary

If there is one thematic event at the heart of the past 4 weeks, it was a series of comments from European Central Bank (ECB) President Mario Draghi back on June 27th, essentially foreshadowing a winding-down of asset purchases. In other words, markets quickly began entertaining the idea of a European taper tantrum. The taper tantrum brought important lessons though–especially for central bankers who might be a bit too eager or forceful when the time came to make a shift. There’s no material reason for the ECB to begin tapering immediately or to maintain a fast pace of reductions once it commits. The ECB can learn from the Fed’s mistakes and take a much more measured approach. Intentional or not, Draghi’s June 27th comments were a trial balloon for the market’s mood with respect…(read more)

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Mortgage Rates Higher Despite Friendly Market Movement

Posted To: Mortgage Rate Watch

Mortgage rates are largely dictated by movements in bond markets–specifically mortgage-backed securities (MBS). When bonds improve, prices rise and investors are willing to pay more to buy loans. This results in rates moving lower. In other words, bond market improvement = lower rates. With all of that in mind, today is a bit of a paradox as the average lender is quoting slightly higher rates today, despite general improvements in bond markets. Nothing too terribly mysterious is at work here though. The inconsistency has more to do with the timing of Friday’s market movements and the generally narrow range over the past four days. Specifically, bonds weakened progressively into Friday afternoon and most lenders never fully adjusted rate sheets to account for that weakness. This left the average…(read more)

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MBS RECAP: Post-Rally Correction Rains on Bond Market Parade

Posted To: MBS Commentary

Today was bittersweet for bond markets, with strong gains in the morning, and an almost complete reversal by the end of the day. As expected, the early focus was on the CPI/Retail sales data duo at 8:30am. Both were bond-friendly, and an unsurprising rally ensued. Actually, to be fair, the rally was perhaps a bit on the aggressive side given the tenor of the data. In other words, a quick drop to 2.28% in 10yr yields seemed like a strong reaction based on the numbers (+1.7 vs +1.7 core annual CPI and -0.2 vs +0.1 Retail Sales). This might have been our first clue that the rally was forcing the hands of those holding short positions (bets on rates moving higher), who would cover those bets by buying bonds. Shorts aren’t the only bets out there. More than a few bond traders decided to recommit…(read more)

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MBS RECAP: Central Banks Push Back on Recent Rally

Posted To: MBS Commentary

Take market analysis with a grain of salt today. To a much greater extent than yesterday, market-watchers would have to dig to connect the dots between news/events and market movement. Volumes were lighter and the shuffling of trading positions looks to have played as big a role as anything else. With that out of the way, let’s connect the dots as best we can. Right out of the gate, a headline from an unnamed ECB official (saying a tapering announcement was likely at the September meeting) pushed bond yields noticeably higher. This occurred just after 7am and resulted in bonds opening weaker for the domestic session. 8:30am economic data wasn’t very interesting as far as traders were concerned. The data also didn’t happen to fall very far from forecasts. The next noticeable move…(read more)

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MBS RECAP: Bonds Build Case for Support After Yellen

Posted To: MBS Commentary

” Support ” and ” resistance ” are two terms often thrown around in market analysis. They loosely refer to ceilings and floors respectively (as far as rates are concerned), but it’s slightly more complicated than that (as covered in our primer on MBS Live ). The gist is that ceilings and floors can still be broken, but they represent levels where rates have been more likely to bounce vs break through. With the past 2 days of sideways apathy, the 2.42% ceiling in 10yr yields was getting some potential affirmation . We needed to see how markets would move once the week’s bigger-ticket events came out. Investors were waiting for Yellen’s semi-annual congressional testimony for an indication that her tone had shifted in a similar fashion as several of her Fed colleagues…(read more)

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MBS RECAP: Volatility in a Micro Range Thanks to Quiet Conditions

Posted To: MBS Commentary

Quite simply, markets are waiting for the last 3 days of this week before gleaning any “takeaways” about the current state of financial markets, the economy, inflation, or Fed policy. Everything over the 1st 2 days of the week has therefore amounted to a pre-game show –and not a very exciting one at that. For the most part, bond yields have held inside the same trading range seen since last Thursday morning, although they did begin to test a break lower after today’s 3pm close. Officially, however, yields closed above the 2.362% floor that’s been intact for 4 days now. With market participants fully aware of the absence of actionable calendar items on the first 2 day of the week, it hasn’t been too surprising to see lighting trading conditions in terms of volume and volatility…(read more)

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