MBS RECAP: Too Strong to Give Up Hope. Too Weak to Rest Easy

– New week, new month, new chance for yields to confirm a ceiling after last week’s rout

– Mixed results for bonds today with early weakness and a late bounce (especially for MBS)

– Very poor liquidity in MBS (buyers and sellers oftentimes FAR apart on their desired prices)

– 100% focus on UMBS 2.5 coupon (why?)

– Bottom line: not enough weakness to give up hope.  Not enough strength to rest easy.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • ISM Manufacturing 60.8 vs 58.8
    (ties highest level since 2004)

  • ISM Prices Paid 86.0 vs 80.0

  • Construction Spending 1.7 vs 0.8 f’cast

Market Movement Recap

08:53 AM

Flat in Asia then moderately weaker in Europe.  10yr low = 1.38%.  Highs of 1.456% this morning, but already pushing back down (1.43% currently).  MBS opened weaker, but seem eager enough to hold a majority of Friday afternoon’s gains.  So far, so good, despite the weaker start (down only 0.06) now.

10:18 AM

Balmy ISM (ties highest level since 2004).  Much higher prices.  Big beat on construction spending, and bonds are…  RALLYING?!  Either the broader bounce narrative is dominating or traders just aren’t worried about March 2021 as much as March 2022.  Either way, we’ll take it.  10yr back to unchanged, and MBS up 6 ticks (.19).

11:29 AM

Dropping off a bit now, but MBS are highly illiquid (wide spread between bid and ask).  No news or events behind the trade.  Bonds just shied away from committing to the morning rally.  10yr +3bps at 1.436 and UMBS 2.5s down 1 tick (-0.03) at 103-22 (103.69).

03:32 PM

The noon hour was basically the bottom for MBS prices.  Treasuries didn’t weaken much after that either.  While the latter are still flat at moderately weaker levels, MBS are staging a stronger comeback, with 2.5s on the verge of breaking even and 2.0s having already done so.  Liquidity is HORRIBLE.  Buyers and sellers are routinely more than an eighth of a point apart on 2.5 coupons (makes the true price a bit of a moving target).


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 2.5

103-26 : +0-03

Treasuries

10 YR

1.4380 : -0.0180

Pricing as of 3/1/21 3:54PMEST

Today’s Reprice Alerts and Updates

12:44PM  :  ALERT ISSUED: Negative Reprices Becoming More Likely

11:22AM  :  ALERT ISSUED: Negative Reprice Risk Increasing

10:17AM  :  Bonds Rallying Despite Stronger Econ Data

8:53AM  :  Moderately Weaker Overnight, But Supportive Undertones


MBS Live Chat Highlights

Michael Baker  :  “If using Encompass, click on the note pad to the right of the borrower drop down in a new file. Then click on import from another loan. This is our work around for converting old 1003 files to the new URLA format. Hope this helps!”


Economic Calendar

Time Event Period Actual Forecast Prior
Monday, Mar 01
10:00 ISM Manufacturing PMI * Feb 60.8 58.8 58.7
10:00 ISM Mfg Prices Paid Feb 86.0 80.0 82.1
10:00 Construction spending (%) Jan 1.7 0.8 1.0
Tuesday, Mar 02
9:45 ISM-New York index Feb 818.2

By Matthew Graham , dated 2021-03-01 15:57:15

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Courtesy of Mortgage News Daily

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