Apparently out of the blue, the much maligned market disadvantage fee for conventional refis has been abolished today. Lenders reacted quickly to adjust prices on new locks, with most going so far as to adjust existing locks based on their proximity to the deal table. This made for good entertainment and discussion on MBS Live, and it was an ideal day for such things, considering the total lack of volume and volatility in the bond market. The 10-year yields ended unchanged at 1bp and MBS underperformed slightly to end up 2-3 ticks weaker (-0.06-0.09). The underperformance could be so simple that investors are making token adjustments for the impact on prepayment speeds by removing the adverse market fee (this isn’t a huge consideration, but it could cash in more credit for a refi starting this spring).

Economic data / events

  • Fed MBS purchases 10 a.m., 11:30 a.m., 1 p.m.

  • Retail sales +0.6 vs -0.4 f’cast, -1.7 before

  • Consumer sentiment 80.8 vs 86.5 f’cast, 85.5 prev

Summary of the market movement

8:55 am

little changed after stronger retail sales. 10-year plus of 2.6 basis points at 1.327 (roughly unchanged since 8:30 a.m.) and 2.0 UMBS are an eighth in the course of the day.

12:37 p.m.

Quiet day, erring on the side of strength. MBS and TSYs are both near the best. Almost green for 10 years. 2.0 MBS still down 3 ticks (0.09).

4:39 pm

The very gradual strength continues, bringing 10-year returns into positive territory for the day (albeit barely). UMBS were essentially flat.