On a few occasions during the past few weeks, I’ve brought MBS underperformance to your attention. Specifically, MBS and mortgage rates hadn’t been improving as robustly as Treasuries since yields topped out back in mid-February (or again on March 21st). A chart of Treasury yields vs mortgage rates shows Treasuries steadily declining (even if the pace is “moderate” at best) while mortgage rates have been essentially flat.
Today, the show was on the other foot. 10yr yields rose more than 5bps throughout the domestic session as the stock market staged yet another comeback. During the same time, MBS loss less than 5/32nds in price. Or, in terms of apples to apples, 10yr Treasury PRICES fell 6/32nds today while MBS prices only fell 2/32nds day-over-day.
The discrepancy is even more stark if we consider mortgage rates. Most lenders are steady to slightly lower compared to Yesterday. Treasuries, on the other hand, are roughly 2bps higher across the board.
All that having been said, it’s Treasuries that we should be watching when it comes to getting a sense of broader bond market momentum, whereas MBS and mortgage rates are more like backward-looking reflections of the bond movement that just happened.
Once again, it was the stock market that set the tone for bonds. The overnight session saw a tariff announcement from China that sent stocks scrambling lower. But the selling wasn’t enough to threaten recent lows in stocks. After stocks bounced, it was pretty much a straight, but gently sloped line higher for both stock prices and bond yields into the end of the domestic session. 10yr yields are right on the verge of breaking back above 2.80%.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
100-00 : -0-02
2.8027 : +0.0197
|Pricing as of 4/4/18 4:17PMEST|
Today’s Reprice Alerts and Updates
2:27PM : ALERT ISSUED: Negative Reprice Risk Increasing; MBS Price Volatility
11:16AM : Bonds Near Weakest Levels as Stock Rally Continues
8:34AM : Bonds Rallying Early. Nothing to do With ADP Numbers
MBS Live Chat Highlights
Jason York : “if a veteran had a FC on a VA owned property, they would have a loss of entitlement of the amount of the loss. Fortunately, VA loans typically perform well and you don’t see as many!”
Hugh W. Page : “I’ve never seen a COE showing any sort of deficiency amount on it. Now I’m curious and want to see one :)”
Jason York : “if they have enough entitlement to purchase the new home, then they don’t have to pay that amount off, but if it is needed, then yes, they would have to pay off the loss to get the entitlement back”
Jeff Nelson : “If the VA COE comes back showing money owning, can they just pay it off and still do a VA loan?”