MBS MID-DAY: 2/10/2012


Things have been fairly calm so far this morning, especially considering the raft of overnight and early morning headlines indicating that one of Greece’s political party leaders will not vote to approve the bailout package. 10yr yields opened about 6bps lower and are currently at those same levels after having explored territory just over 1bp in either direction (aka: pretty narrow range).

Yesterday’s roll in Fannie and Freddie 30yr MBS Coupons have the appearance that prices dropped an extra 8/32nds give or take. But this is because February coupons are charted on 2/10 while March coupons are charted today–in other words, they’re the new “front month.” March coupons are essentially right where they were when they came in this morning, just like Treasury yields.

The effects of the Consumer Sentiment data were mostly seem in stock markets, which weakened frolling the 9:55am release. Bond markets have been trending in a firmly sideways fashion despite this, with 10yr yields perhaps slanted a bit bearishly, while MBS are left to try to hold a price floor around 103-12. So far, so good in that regard as prices are currently 103-14 in Fannie 3.5’s, with volume dying down. We’ll get a Bernanke speech at 12:30, which may or may not be too late on this Friday to stir up much of a response. Beyond that, we’re watching today’s highs in 10yr yields around 1.996. If they were to break much higher than that, it could coincide with MBS having a tough time holding on to their lows of the day.

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