MBS RECAP: 1/25/2012

The 5yr auction was slightly stronger than expected and slightly better bid than previous averages. The yield came in 1.3 bps lower than the 11:31:30 “when-issued” levels.

10yr yields and MBS rallied on the results with the former falling to test the broader ranger, as expected, in the mid 2.03’s and the latter rising to 102-27. Although 10’s are currently showing the nice bounce at the “as expected” trendline, it’s not out of the realm of possibility for that resistance to fall, even ahead of the afternoon’s FOMC-related events. If it does that, or merely stays close, MBS look like they have made sufficient gains for a few of the “early crowd” type lenders to consider repricing positively. Conversely, we’d expect lenders in general to be a bit more conservative than normal given the looming events.

Bottom line is easy though… If your finger is on the lock trigger today, we would lighten the grip a bit after this auction, but stay ready for a 102-19 break as an indication that the risk is “back on” for reprices in the other direction (in other words, 102-19 or 102-18 are good places to set automated lock alerts).

Article source: http://www.mortgagenewsdaily.com/mortgage_rates/blog/244690.aspx

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