LLPA Impact vs Powell Speech. Time to Lock?

MBS RECAP: LLPA Impact vs Powell Speech. Time to Lock?

Much has been made (by news media… not bond market participants) of Powell’s Jackson Hole (virtual) speech on Thursday.  After all, a rethink of the Fed’s “framework” sounds like a big deal, right?  The only catch is that they’ve been talking about that for years.  Powell will have a tough time surprising the market tomorrow, even though anything’s possible.  Meanwhile, the removal of the recently-added LLPA is an actual and massively important consideration for loan pricing, locking, and floating.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Durable Goods 11.2 vs 4.3 f’cast, 7.7 prev

  • Cap-ex (excludes defense/aircraft) 1.9 vs 1.9 f’cast, 4.3 prev

  • 5yr auction: reasonably strong (.298 vs .309 f’cast)

Market Movement Recap

08:45 AM

Bonds were weaker overnight, mostly in Asia, and mostly without provocation/correlation.  Decent volume suggests a continuation of this week’s curve steepening trend (longer-term rates rising vs shorter-term rates).  10yr up over .71% and MBS down almost an eighth.  A bit of resilience just now after stronger Durable Goods data.

09:27 AM

Nice little bounce, mostly for MBS (now back to unchanged).  10yr yields down a bit, but still up 1.2bps on the day (.699%).  No overt motivation, but not a big enough move to merit a search.

11:09 AM

Nice little bounce evaporated and MBS just hit their AM lows again.  Still inside today’s range for now though.

01:11 PM

5yr auction was fairly strong (1bp lower than expected, and very high bid-to-cover).  Longer-term yields didn’t respond much, but they DID respond.  10yr yields still higher on the day but down half a bp since auction at .703.  UMBS are pretty sideways, up a tick (0.03) since the auction, but still down a tick on the day.

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

MBS

UMBS 2.0

103-01 : +0-00
Treasuries

10 YR

0.6916 : +0.0096
Pricing as of 8/26/20 4:19PMEST

Today’s Reprice Alerts and Updates

8:41AM  :  ALERT ISSUED: Bonds Weaker Before and After Durable Goods

Economic Calendar

Time Event Period Actual Forecast Prior
Wednesday, Aug 26
7:00 MBA Purchase Index w/e 310.2 308.9
7:00 Mortgage Refinance Index w/e 3423.0 3809.7
8:30 Durable goods (%)* Jul 11.2 4.3 7.6
8:30 Nondefense ex-air (%)* Jul 1.9 1.9 3.4
Thursday, Aug 27
8:30 GDP Prelim (%)* Q2 -32.5 -32.9
8:30 Jobless Claims (k) w/e 1000 1106
10:00 Pending Sales Index Jul 116.1
10:00 Pending Home Sales (%) Jul 3.0 16.6
13:00 7-Yr Note Auction (bl)* 47

By Matthew Graham , dated 2020-08-26 16:21:53

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Courtesy of Mortgage News Daily

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