MBS RECAP: 12/8/2011


Excerpt from the latest blog post on MBS Commentary…

MBS prices rose to their highest levels in over 2 months today as stocks and Treasury yields fall to their lowest levels of the month. Fannie 3.5 MBS were already having a pretty tough month back in October when the last iteration of an EU Summit captured the market’s attention. As 10yr yields rose from historic lows in the 1.7’s, MBS prices plummeted from 103-09 to 100-20. They spent most of the month languishing sideways just above those levels and the impending EU summit near the end of the month was no help. In fact, that was the catalyst for 10yr yields brief venture up to 2.40.

This time around, things are a bit different. Perhaps markets are firmly skeptical due to the rapid unwinding of optimism after the last summit. After all, MBS rose from 100-13 to 102-13 in just three days. 102-13 has more or less been the highest Fannie 3.5 price seen since then, until the last 2 days. We might point out that the January coupons that are soon to be in front of the class have NOT been any higher. That would allow us to say that both MBS and Treasuries have returned EXACTLY to the 11/1/11 levels they hit as the October Summit swings were unwound. Interesting? Intentional? Who knows… Whatever the case, trading levels are clearly conveying a high degree of skepticism heading into tomorrow’s glut of European wires. Even the uber-resilient stock market has done its best to get back down to 11/1 levels:

(charts follow):

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