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reichone
99 Posts |
 Posted - 05/29/2008 : 1:00:14 PM
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just curious, there are a lot of smarter people than I so I wanted to pick those brains who have a good insight on where they may to in the immediate short term <30 days.
Thanks for your input... |
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reichone
99 Posts |
Posted - 05/29/2008 : 2:30:46 PM
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| anyone..... |
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jstar
743 Posts |
Posted - 05/29/2008 : 2:31:17 PM
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| up...... Bonds tanked Hard today. |
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ppulatie
2278 Posts |
Posted - 05/29/2008 : 2:37:49 PM
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Up, Up and Away, in their beautiful balloon.
Sorry, couldn't resist. |
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AGreene00
2901 Posts |
Posted - 05/29/2008 : 2:38:30 PM
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| Who knows in this market. Follow mgraham's mortgage blog, it is good insight. |
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Tsnyder
8312 Posts |
Posted - 05/29/2008 : 2:40:15 PM
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Up... then down again... then up... then stable for
a few days... then down slightly... then up again...
Kinda like it's always been...
Tsnyder |
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VVance
2522 Posts |
Posted - 05/29/2008 : 2:50:32 PM
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quote:
Originally posted by reichone
just curious, there are a lot of smarter people than I so I wanted to pick those brains who have a good insight on where they may to in the immediate short term <30 days.
Thanks for your input...
I'm not flattering myself by thinking I'm smarter then you. The MBS had been creating their own path, seperate from other long term bonds...up until now. The 10 year broke through a resistance level at 3.94% indicating rates will probably stay up for a few weeks to a few months. Good thing too...we need to cool off this over-heated mortgage market (can't resist the sarcasm). |
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AH0215
160 Posts |
Posted - 05/29/2008 : 2:52:42 PM
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| I checked the rates today compare to yesterday's it has been up for 0.25% in one day. It's ridiculous. |
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Scrooge McDuck
9824 Posts |
Posted - 05/29/2008 : 2:52:47 PM
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| what are tonights lottery numbers, and why? |
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mojojojo_1
863 Posts |
Posted - 05/29/2008 : 2:54:30 PM
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ill just wait rates are going to drop soon...
love homeowners that gamble on 100s of thounsands of dollars, or rather their shelter. |
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VVance
2522 Posts |
Posted - 05/29/2008 : 2:54:49 PM
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quote:
Originally posted by Scrooge McDuck
what are tonights lottery numbers, and why?
Which Lottery? |
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AGreene00
2901 Posts |
Posted - 05/29/2008 : 3:01:50 PM
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quote:
Originally posted by mojojojo_1
ill just wait rates are going to drop soon...
love homeowners that gamble on 100s of thounsands of dollars, or rather their shelter.
That has always amazed me. These customers who keep all their money in savings accounts earning 1.3% annually have no problem with floating 30 year fixed mortgage rates on their homes. Never understood that. |
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financeone
1730 Posts |
Posted - 05/29/2008 : 3:16:18 PM
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quote:
Originally posted by VVance
quote:
Originally posted by reichone
just curious, there are a lot of smarter people than I so I wanted to pick those brains who have a good insight on where they may to in the immediate short term <30 days.
Thanks for your input...
I'm not flattering myself by thinking I'm smarter then you. The MBS had been creating their own path, seperate from other long term bonds...up until now. The 10 year broke through a resistance level at 3.94% indicating rates will probably stay up for a few weeks to a few months. Good thing too...we need to cool off this over-heated mortgage market (can't resist the sarcasm).
Now that's funny! |
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ebaron
203 Posts |
Posted - 05/29/2008 : 4:15:09 PM
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quote:
Originally posted by Scrooge McDuck
what are tonights lottery numbers, and why?
4 8 15 16 23 42 |
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mgraham224
1008 Posts |
Posted - 05/29/2008 : 4:56:12 PM
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quote:
Originally posted by Scrooge McDuck
what are tonights lottery numbers, and why?
LOFL! I still haven't stopped laughing at this one. So true, so true.
Those rare few that actually know I am the anonymous masked-man behind the blog email from time to time to ask me the same question. I give them the same answer: here's what technicals say, here's what data indicates, but all of that could go out the window if one Saudi oil baron or one chinese investment fund decide to make a big buy or sell tomorrow.
So I could take a stand, but I only ever have a 50% chance of being right when predicting more than 2 hours ahead or less than 2 months ahead.
More than 2 months from now, I still don't think rates will be up up and away. Global inflation is on tap now (see one of the most recent issues of the Economist). So our dollar can gain some strength and our "relative inflation" can decrease. Combined with what must be a slow economy at best, and receding economy at worst, and the stage is set for another multiple year period of low rates as we've had in past recessions and downturns.
Personally, I think MBS over-sold this week, and to the same extent that there is technical resistance at the upper price levels of last Thursday, there is nearly an equal amount of resistance at the lower price levels of late this morning, as we could plainly see with the unexplained "buy-up" at 1pm eastern, that mystically and magically broke trends with rising stocks. Plus, consider the fact (and yes, it is a fact) that from a purely emotional level, traders tend to buy more fixed income on Fridays than they do equities, combined with the fact that the yield spread between MBS curve and treasury curve is still historically very wide, and the stage is indeed set for better rates tomorrow.
I know that 98% of you have no clue what I'm talking about, but feel free to ask questions about what you don't understand without fear of reproach. After all, even if you respond with a "what the heck does historical yield spread between price curves mean?" it's not like anyone else is going to laugh at you on this site, least of all me.
But if you're like most and are simply happy not to understand, that's fine, I'll make it easy for you by giving you exact probabilities of my assertions. Ready?
It's a 50% chance.
(see, this way I can say "see, told you so if rates improve tomorrow" or "see, I said it was 50/50 if they don't improve).
How many lenders even let you lock conforming loans overnight anyway? Only one or two that I know of. So why not just wait till rates come out in the morning and then watch my blog for something you actually can count on which is immediate warnings of rate increases or decreases? If you can lock overnight, your best bet is to keep an eye on treasuries and stock futures which trade 24/7. I would post overnight MBS trading, but I have to sleep some time.
Good luck! |
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RodneyLO
832 Posts |
Posted - 05/29/2008 : 5:25:10 PM
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Mr. Graham...as always, the smartest man in the room.
Thank you, Sir! |
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AGreene00
2901 Posts |
Posted - 05/29/2008 : 5:26:29 PM
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| Great post Matthew. I read the blog everyday and it has made me an untold amount of money already. |
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mgraham224
1008 Posts |
Posted - 05/29/2008 : 5:45:21 PM
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Stop guys, I'm blushing...
But seriously, thanks.
Just hang on and the big changes are going to start hitting the site, really cool stuff from what the powers that be tell me.
Adam, I love to hear "untold amount of money." I just love it. Also makes me think that people probably are not going to mind the $20 bucks a month subscription. |
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mgraham224
1008 Posts |
Posted - 05/29/2008 : 5:46:53 PM
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quote:
Originally posted by RodneyLO
Mr. Graham...as always, the smartest man in the room.
Thank you, Sir!
Let's not get carried away now... It's just because I was an English major.
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financeone
1730 Posts |
Posted - 05/29/2008 : 5:56:59 PM
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I ,too, read Matt's diatribe every morning.
But, unfortunately, can count the amount of money that I've made! I'm still happy with it, although it's not "untold".
Thanks Matt & I'll go $20. |
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RodneyLO
832 Posts |
Posted - 05/29/2008 : 6:03:02 PM
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quote:
Originally posted by mgraham224
quote:
Originally posted by RodneyLO
Mr. Graham...as always, the smartest man in the room.
Thank you, Sir!
Let's not get carried away now... It's just because I was an English major.
Haha!
Just trying to say thanks...you do a great job. |
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Mandyvilla
3635 Posts |
Posted - 05/29/2008 : 6:03:50 PM
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You lost me......do I buy one lottery ticket or two?
And people trust me w/ their money.....
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propertylender.c
1341 Posts |
Posted - 05/29/2008 : 6:35:13 PM
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Anyone who can predict rates would be making millions.
Stock market is not tanking because no other place to park your money unless it is in oil or gold or foreign currencies.
Since the Fed. has basically said they will no longer lower rates, bonds yields are rising and this will in turn hurt our business more.
Remember, the Fed. only (truely) has control over adjustable rates, not fixed rates.
So much for refinancing people. |
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dtabar
816 Posts |
Posted - 05/29/2008 : 7:15:45 PM
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quote:
Originally posted by ebaron
quote:
Originally posted by Scrooge McDuck
what are tonights lottery numbers, and why?
4 8 15 16 23 42
Good one, season finale tonight! |
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CoolMtgGuy
4109 Posts |
Posted - 05/29/2008 : 7:23:07 PM
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| If you think that it will go up or down, you will be right. |
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FLProcessor
442 Posts |
Posted - 05/29/2008 : 7:37:16 PM
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Matthew,
I do have one question for you... How do you get your bond quotes? Am I correct in my belief that the CUSIP is not consistent for, say for example, the FNMA 5.5% 30yr -- as a new CUSIP would be issued for each new issue?
Assuming this is the case, it's never made sense to me how one easily and consistently locates the most relevant agency issues and monitors their pricing.
Thank you in advance. -TM |
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ebaron
203 Posts |
Posted - 05/29/2008 : 8:25:07 PM
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quote:
Originally posted by dtabar
quote:
Originally posted by ebaron
quote:
Originally posted by Scrooge McDuck
what are tonights lottery numbers, and why?
4 8 15 16 23 42
Good one, season finale tonight!
check out www.timelooptheory.com. This guy is dead on with the plot. not a bad finale. |
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mgraham224
1008 Posts |
Posted - 05/29/2008 : 10:20:15 PM
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quote:
Originally posted by FLProcessor
Matthew,
I do have one question for you... How do you get your bond quotes? Am I correct in my belief that the CUSIP is not consistent for, say for example, the FNMA 5.5% 30yr -- as a new CUSIP would be issued for each new issue?
Assuming this is the case, it's never made sense to me how one easily and consistently locates the most relevant agency issues and monitors their pricing.
Thank you in advance. -TM
It's anywhere between $850 and $1800 per month depending on who you trust. When you pay this kind of money it's definitely both easy and consistent to locate nothing but the most relevant agency issues. So relevant in fact, that my 2nd monitor in my office looks exactly like the 2nd monitor at almost every lender's secondary desk (at least the one's that reprice effectively and still make money). We're all watching the same game, but everyone has a different notion of who is going to win.
That does bring up a relevant point about one thing I really try to do differently which is to make my advice adaptable based on what your lender has done recently in terms of reprices. Provident and CITI for instance have pretty predictable reprice policies and almost follow a mathematical schedule according to the price curve of current coupons, whereas almost every other lender can be random at times. If it wasn't for this phenomenon, it would be even easier to recommend locks/floats, but sometimes (like today for instance), the price curve will have rebounded after sharply tanking. Some lenders that are behind the curve will just be getting to their reprice for the worse when Provident has already repriced for the better after hedging at the beginning of the day.
But over a slightly longer run, lenders tend to hold a very predictable margin over PAR. Provident runs the lowest, offering par on a coupon priced at 100.22 or better. So basically, they are working for 22/32nds. The next closest lender in price would be wanting at least a point as you can plainly see any time you compare pricing. Sometimes (like this morning), Provident opened up at about a point over par, so we know their pricing philosophy could withstand some of the selling that occurred late morning. Then when the rebound hit, they were right where they wanted to be, thus, the rapid 8/32nds increase in the bond led to rapid 8/32nds price improvement for Provident.
But a lender that priced at their normal spread this morning would have had to either offer less than a .25 YSP improvement or else only offer it after hitting us for the price decrease from late morning.
If you've read this far, either you understand what I'm talking about, or you want to. As always, I'm happy to answer questions, but please call or email as I don't always get a chance to check in on BO on busy days. |
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rad
1404 Posts |
Posted - 05/29/2008 : 10:26:10 PM
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quote:
Originally posted by mgraham224
Stop guys, I'm blushing...
But seriously, thanks.
Just hang on and the big changes are going to start hitting the site, really cool stuff from what the powers that be tell me.
Adam, I love to hear "untold amount of money." I just love it. Also makes me think that people probably are not going to mind the $20 bucks a month subscription.
What's the website? Thanks. |
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FLProcessor
442 Posts |
Posted - 05/29/2008 : 10:40:43 PM
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Matthew,
That's very interesting that so few have systematically automated the pricing procedure, thank you for sharing that information. Everything you've written so far is straightforward, no worries with people being able to understand it, I wouldn't think.
To return to the topic of agency bond pricing, I'm simply looking for agency pricing alone (delayed is fine); not a real-time feed, or full feed ala Bloomberg/etc. I've found a few sites that offer a *licensed/publishable* feed for about $500 a month; therefore, I bet if we looked, we could find a private feed for less that, and a delayed feed for even less.
Out of curiousity, what companies are you referring to, offering the $850+ feeds?
Again, to my question regarding the CUSIP: it would change with each issue, so what process do you use to consistently pickup the same feed. Strictly by name rather than symbol?
Thank you! |
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mgraham224
1008 Posts |
Posted - 05/29/2008 : 10:46:33 PM
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quote:
Originally posted by FLProcessor
Matthew,
I do have one question for you... How do you get your bond quotes? Am I correct in my belief that the CUSIP is not consistent for, say for example, the FNMA 5.5% 30yr -- as a new CUSIP would be issued for each new issue?
Assuming this is the case, it's never made sense to me how one easily and consistently locates the most relevant agency issues and monitors their pricing.
Thank you in advance. -TM
Forgot to answer the other part of your question. The CUSIP is different for each 5.5 30 year settlement date. Right now, we're looking at June as being the most current settlement. This is known as OTR, or "on the run." Lenders have to fund, pool, and sell quickly and efficiently to be pricing at OTR's. Still, even if they are not pricing based on OTR's, they are really the only issue that most secondary managers watch. Some of the smarter dudes however will use "off the runs" which would be July and August settlements to gauge potential future demand, thus potentially saving their company thousands of dollars a day by hedging an eighth or so.
I only look at OTR's. Almost all relevant analytics focus on OTRs. Any time Spread Versus Treasuries (referred to as "spread," "basis,") is mentioned, it is always assuming OTRs and always concerns yield as opposed to price. What we look at is not available anywhere on the web with the exception of one website that is very hard to find and worthless as a pricing tool because data is delayed by up to 20 minutes. There are certain FNMA FHLMC related securities that are traded with the public, but they tell you nothing about mortgage pricing. What we look at has not even settled yet, thus it is TBA (to be announced). So we have to examine orders placed from dealer to dealer (for instance we can see if Chase places an order with BofA right here and now, but that issue won't settle until a specific date next month). So that's why you might here it referred to as TBA-MBS.
Anyway, I can see trades flash red or green within 0.5 seconds of the time the guy at Chase's trade desk decides to click "order" in BofA's window. I'm not special, just willing to part with the money to see it. it's kind of like the matrix. At first, it doesn't make a whole lot of sense, but now, it's like getting a whole beautiful picture from just a screen full of flashing numbers.
Long story short, anyone can see what I see if they have the money, but most don't have enough adderall to interpret it in conjunction with reading every piece of relevant economic news, consider the upcoming economic news, spend at least half an hour a day on the phone with analysts, keep several extra monitors in view from 5AM to 2PM every day without exception, type 100WPM, and do all of the above at the same time as originating enough regular old residential loans to feed a family. I suppose you could survive doing just market commentary if you had a website like MMG, but in general, you won't do anyone any good unless you can watch the damn thing all damn day, and are high enough on ADD meds to make your money on loans and be doing another full time job at the same time.
So in conclusion, give me $20 bucks a month and I'll save you a grand and the prospect of getting burnt out, and alienating friends and loved one's with your inexplicable obsession with a flashing colored computer screen. Ha! Just kidding. Not really asking for money at this point. (but seriously, send money!)
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mgraham224
1008 Posts |
Posted - 05/29/2008 : 11:00:08 PM
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quote:
Originally posted by FLProcessor
Matthew,
That's very interesting that so few have systematically automated the pricing procedure, thank you for sharing that information. Everything you've written so far is straightforward, no worries with people being able to understand it, I wouldn't think.
To return to the topic of agency bond pricing, I'm simply looking for agency pricing alone (delayed is fine); not a real-time feed, or full feed ala Bloomberg/etc. I've found a few sites that offer a *licensed/publishable* feed for about $500 a month; therefore, I bet if we looked, we could find a private feed for less that, and a delayed feed for even less.
Out of curiousity, what companies are you referring to, offering the $850+ feeds?
Again, to my question regarding the CUSIP: it would change with each issue, so what process do you use to consistently pickup the same feed. Strictly by name rather than symbol?
Thank you!
Ah, I see more specificity in your question now. Basically, the software only ever shows us the OTR issue, plus the 2 trailing "off the run" issues. As soon as June is settled, July becomes the OTR and September is now "on deck" as the second "off the run."
Sorry, but can't divulge websites on the public forum. Feel free to call me at 503-201-5858 and I'll point you in the rightest direction I can. Basically Bloomberg only executes 30 percent of the trades in the TBA MBS market, the other platform (the one that I use) executes 60% of the trades.
you're a little bit off on your pricing philosophy. A licensable feed would be worthless because bloomberg and the platform I use do not offer them, and any other TEP is not giving accurate price data because they do not have enough volume coming through them. In this sense, private feeds are actually more expensive than public feeds, because anyone offering a public feed is either delayed or grossly inaccurate.
I've researched and demo'd all of them, in addition to having friends that have bloomberg and others. After all that, I'm even more certain there are only two players, and no "middle ground" between those players and my blog, with perhaps the only exception being Barry. Also unfortunate is the fact that there is no way to pay less to "just get agency pricing." You'll get GNMA, basis, swaps, etc... Of course, you'll need to have treasuries too, so if you're not on bloomberg, your ala carte order just went up by another 500 bucks. And if you're like me, you'll want to be able to export and data and build graphs, more ala carte money there.
Anyway, give me a call if you want to shoot the **** on the MBS market. I love talking about it on the phone because, believe it or not, I'm actually aware of the fact that I don't know everything and I learn something new every time I talk to someone about it, or at the very least I learn a new way of communicating something which helps me with the blog in the long run.
Also, don't be so sure that this is straigtforward to all readers. If it is, that would be very pleasing to me, but I have a feeling it is not as readily accessible as you might think without infusing pedantic verbiage into a subject matter that operates better without it. Here's the essence of my point: when I get on the phone with my buddy who is a senior MBS analyst in NY, I feel completely retarded, yet he claims he is "just another guy on the Street." Talk about a disparity of knowledge in an industry. |
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mgraham224
1008 Posts |
Posted - 05/29/2008 : 11:03:44 PM
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quote:
Originally posted by rad
quote:
Originally posted by mgraham224
Stop guys, I'm blushing...
But seriously, thanks.
Just hang on and the big changes are going to start hitting the site, really cool stuff from what the powers that be tell me.
Adam, I love to hear "untold amount of money." I just love it. Also makes me think that people probably are not going to mind the $20 bucks a month subscription.
What's the website? Thanks.
Try clicking on the link in my signature. |
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KHufford
6517 Posts |
Posted - 05/29/2008 : 11:17:00 PM
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Hey Matt, long time no talk, hope your doing well, and lay off the adderal!
Anyway, reading this you remind me of the book I am reading, "Ugly Americans"
Familiar with it?
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mgraham224
1008 Posts |
Posted - 05/30/2008 : 05:56:41 AM
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quote:
Originally posted by KHufford
Hey Matt, long time no talk, hope your doing well, and lay off the adderal!
Anyway, reading this you remind me of the book I am reading, "Ugly Americans"
Familiar with it?
What's up Kyle! All is well. Life is good and busy of course with the 1 year old. How are you?
The adderall thing is a joke, by the way (I only take what the guy in the white coat tells me to).
I haven't read "ugly americans," but the title at least, fits me perfectly! I'll look into it. |
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mgraham224
1008 Posts |
Posted - 05/30/2008 : 06:05:50 AM
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| It's a bit too early in the day to tell, but MBS have improved 8-12 32nds so far depending on which coupon you're looking at. Like I said (with a 50/50 probability right?!), today should be a better day for MBS. |
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FLProcessor
442 Posts |
Posted - 05/30/2008 : 09:00:37 AM
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Matthew,
You're probably familiar with MrktAlert, which is what we presently use for pricing/commentary. I would not mind paying for another, because it's small potatoes compared to the work that goes into it.
That said, have you thought about doing something along those lines, with a little more information and quick-to-surmise summaries? This makes it easier for everyone in the operation to understand.
On a separate note... Thank you for the additional information. I get so excited when I find posts like this on the forum; I wade through all of the off-topic stuff that litters these walls, just to find this sort of gem. I just want you to know that I really appreciate it.
BTW: The reason we're looking for something beyond simple market-commentary or limited quoting info we receive from MktAlert, is that I would like to have the data and be able to plot it myself. Partially because I have a background in finance and would love to use an analytics tool to track this information.
The second reason, is a result of an offsheet-pricing setup we're attempting to structure. We've noticed that investors have become less consistent with their markup over par rates, precisely in line with your observation. Although... Ours is nowhere near as systematic -- and a large reason we've noticed this, appears to be more drastic shifts related to controlling volume more than simple lagging.
Because we're a somewhat high-volume/low-price operation, we've been discussing the possibility of pushing 90% of our business to a single investor, if they honor a fixed-markup based on rolling-par-rates. This assures that we know what we're getting into, and this investor doesn't jump all over the place, relative to others (the main problem we've had in structuring offsheet deals in the psat).
If you consider this pricing methodology, it makes sense that commentary or a web interface does not fit out bill (despite this being ideal for just about everyone else). In fact, I wouldn't need an interface at all -- just a simple feed (ala XML, etc).
With that aside, I certainly think $20 for additional commentary is a great deal, and I didn't mean to sway the discussion radically from your original suggestion :-). |
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mgraham224
1008 Posts |
Posted - 05/30/2008 : 09:10:03 AM
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Not at all! And in fact, the additional functionality you mention is exactly what we have on tap. I have been wanting to roll it out for quite some time, but the rational and calm website owner wants to make sure the system is refined before rolling it out whereas I would just get it on the road and fix it up while in motion. His mentality is probably for the best here.
This also brings up another potential service I could offer which would be to bridge the gap between the Bloomberg's and the commentary websites. In the meantime, there may be something I can do to help you out.
As far as the lender consolidation, I think you could certainly put more eggs in one basket, but I would never have that be the only basket, because there are rare periods where even the best lenders will be priced out of the market. So you need a pressure release valve.
I know everyone feels that provident is very hard to work with, but I'm sure if you could meet the rigorous requirements of their correspondent program, life would be pretty good. I actually do not know anyone who has qualified for it.
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FLProcessor
442 Posts |
Posted - 05/30/2008 : 09:52:56 AM
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> because there are rare periods where even the best lenders
> will be priced out of the market. So you need a pressure
> release valve.
Exactly. That is precisely why we're attempting to negotiate based on a fixed markup to the bond, rather than offsheet incentives. I do not know that we will ultimately be successful; however, in my mind, it is the only way to assure that if we're pusing 90% of our business in one direction, we don't get hung-out-to-dry for doing so.
Your idea, I assume of offering a data matrix (for analytics or otherwise), could be very marketable, I believe.
One other suggestion for your service (which you may have already implemented)... I believe MMG has some sort of "dumbed down" commentary that can be used to "parrot" to the borrower/prospect. If I remember right, it's not "dumbed" enough to be understandable by any of the clients we work with. Perhaps if you could create an exceptionally easy, sussinct, summary overview in "borrower speak" -- that could have great application as well. |
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mgraham224
1008 Posts |
Posted - 05/30/2008 : 10:06:46 AM
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| yep, there is already a consumer version of the blog. |
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1paul
307 Posts |
Posted - 05/30/2008 : 10:08:15 AM
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I heard a funny one about what rates will do:
Rates will do one of two things: either they will
1. Stay the same OR
2. Change |
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MisterVA
6767 Posts |
Posted - 05/30/2008 : 11:05:51 AM
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quote:
Originally posted by Mandyvilla
You lost me......do I buy one lottery ticket or two?
And people trust me w/ their money.....
If you buy two, you'll have to split the pot. |
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FLProcessor
442 Posts |
Posted - 05/30/2008 : 12:24:45 PM
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Matthew,
Re-examining your post on PFG's pricing, I am curious about one point. You mentioned PFG running 100.22, the .22 suggests a 1/100 (BP) pricing, but later you mention it in standard notation: 22/32nd.
Is it accurate to say that their margin is 22/32nd (69bp)? Based on my reading of the bond, we're at 99.234 for FNMA 5.5% 30yr. If Provident runs a 22% margin, that would put us squarely at 1% over the 5.5% issue. If they run a 69% margin, that would put us at 1.47% over (eg - theoretically, if pricing sat right where PFG intended, it would cost us 1.47% to buy 5.5%).
Does this sound about right?
BTW - Took a look at the "consumer" section of your blog... I had not noticed this until you pointed it out, but it's really nice. I like the tutorial as well. I just wish I had borrowers that could understand this. I'm lucky if they grasp the fact that someone under-quoted regulated/non-lender fees, and that their gross-fees truly are higher than ours, despite what the underestimate reads :-). |
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mrwiizrd
32 Posts |
Posted - 05/30/2008 : 12:48:35 PM
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Matthew,
Love the blog, and I do have a question for you:
"Plus, consider the fact (and yes, it is a fact) that from a purely emotional level, traders tend to buy more fixed income on Fridays than they do equities"
Just out of curiosity, why do you think this happens? |
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mgraham224
1008 Posts |
Posted - 05/30/2008 : 1:11:02 PM
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quote:
Originally posted by FLProcessor
Matthew,
Re-examining your post on PFG's pricing, I am curious about one point. You mentioned PFG running 100.22, the .22 suggests a 1/100 (BP) pricing, but later you mention it in standard notation: 22/32nd.
Is it accurate to say that their margin is 22/32nd (69bp)? Based on my reading of the bond, we're at 99.234 for FNMA 5.5% 30yr. If Provident runs a 22% margin, that would put us squarely at 1% over the 5.5% issue. If they run a 69% margin, that would put us at 1.47% over (eg - theoretically, if pricing sat right where PFG intended, it would cost us 1.47% to buy 5.5%).
Does this sound about right?
BTW - Took a look at the "consumer" section of your blog... I had not noticed this until you pointed it out, but it's really nice. I like the tutorial as well. I just wish I had borrowers that could understand this. I'm lucky if they grasp the fact that someone under-quoted regulated/non-lender fees, and that their gross-fees truly are higher than ours, despite what the underestimate reads :-).
Sorry, the 100.22 was meant to be a 100-22.
or better yet a 100-22/23 (which really confuses people as they think I'm talking about twenty two twenty seconds when in fact it simply means 100 and 22/32 bid price versus 100 and 23/32 offer price.
I think you are thinking along the right lines with respect to provident. |
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MisterVA
6767 Posts |
Posted - 05/30/2008 : 1:17:15 PM
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| And do you see much divurgence from conventional coupons with respect to government coupons? |
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FLProcessor
442 Posts |
Posted - 05/30/2008 : 1:17:23 PM
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Got it. So if I understand correctly, PFG and Citi have fairly consistent markup, related to the bond. PFG, for example, attempts to sit at about 22/32nd markup for their "base pricing, 30 day lock".
In that case, it would cost us about 1.47% to buy down at the rate quoted above. At present, it's costing 1.25% -- so this is not too far off.
I have heard others say that PFG operates on a 10-20% margin over the bond; however, I've never heard anything scientific to justify this.
As far as going correspondent with PFG, I couldn't imagine there would ever be a greater kiss of death. I can't imagine how much money I would eat, if I were taking liability for all perfect loans, which PFG kicked, regardless of their quality. Purely a theoretical discussion, but still - it's one of those things that makes you cringe just hearing it! |
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FLProcessor
442 Posts |
Posted - 05/30/2008 : 1:19:56 PM
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> And do you see much divurgence from conventional coupons
You mean from FNMA to Ginnie Mae? Lately Ginnie is doing slightly better, it seems. I have to assume this is related to the liquidity concerns (Ginnie is truly gov backed), wouldn't that be fair, Matthew? |
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KHufford
6517 Posts |
Posted - 05/30/2008 : 1:23:19 PM
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quote:
Originally posted by mgraham224
quote:
Originally posted by KHufford
Hey Matt, long time no talk, hope your doing well, and lay off the adderal!
Anyway, reading this you remind me of the book I am reading, "Ugly Americans"
Familiar with it?
What's up Kyle! All is well. Life is good and busy of course with the 1 year old. How are you?
The adderall thing is a joke, by the way (I only take what the guy in the white coat tells me to).
I haven't read "ugly americans," but the title at least, fits me perfectly! I'll look into it.
LOL. You have mail. And its not about unattractive American people. Its a kick ass true story about Nikkei Traders from the US who make billions by doing basically exactly what you are doing with MBS but on a much LARGER scale. F
From the same guy who wrote the book behind the movie "21".
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mgraham224
1008 Posts |
Posted - 05/30/2008 : 1:25:54 PM
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quote:
Originally posted by mrwiizrd
Matthew,
Love the blog, and I do have a question for you:
"Plus, consider the fact (and yes, it is a fact) that from a purely emotional level, traders tend to buy more fixed income on Fridays than they do equities"
Just out of curiosity, why do you think this happens?
This is all conjecture, but my personal opinion is that whereas stocks are aggressive, bonds are conservative. I imagine the aggressive mindset peaks in early to mid-week. Going into the weekend, with two full days of uncertainty, generally a slightly smaller percentage of people working to 5pm, I would think bonds must feel safer in some respect going into the weekend. |
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mgraham224
1008 Posts |
Posted - 05/30/2008 : 1:33:20 PM
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quote:
Originally posted by FLProcessor
> And do you see much divurgence from conventional coupons
You mean from FNMA to Ginnie Mae? Lately Ginnie is doing slightly better, it seems. I have to assume this is related to the liquidity concerns (Ginnie is truly gov backed), wouldn't that be fair, Matthew?
a 6.0 FNMA OTR is at 101-12
a 6.0 GNMA OTR is at 101-23
But now get this:
a 5.5 FNMA OTR is at 99-07 whereas
a 5.5 GNMA OTR is at 99-29
22/32nds is a big difference. it speaks to the quality perception of MBS that are guaranteed by the government. But you will almost never see that full 22/32nds difference in price on the rate sheets. So in a nutshell, more money is made on GNMA's (but more money is spent as well).
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