The small distance between today’s periodic highs and lows continues to surprise us into the afternoon. Indeed, today’s rally hasn’t clocked more than a 4/32nd swing between prominent highs and lows. Fannie 3.5’s are grinding against 102-06 at the moment as 10yr yields test a break of 2.30.
After the aformentioned levels, MBS would have their next major pivot at 102-10 to 102-11 and 10’s would try to enter the 2.29-2.26 band of yields that marked the battle to contain the sell-off last week. Several lenders have already repriced for the better and simply holding ground at current levels might be enough to entice a few more to poke their heads out of the recent wreckage with a positive reprice–an eventuality that gets more and more likely if we happen to approach the 102-10 pivot area.