MBS RECAP: 9/23/2011


For the most part, morning rate sheets didn’t reflect the early weakness in MBS. 3.75 to 3.875% was left largely intact. That could continue to be the case at quite a few lenders into this afternoon, but there are several factors creating more risk now.

– TSYs and MBS have fallen further.
– Decent rates this morning created more locking
– More locking creates risks of pipeline control reprices
– More locking + MBS weakness = more origination = more supply and price pressures for MBS.

Combine all of the above and there are several factors creating risks of additional losses into the afternoon, especially considering its Friday.

We’re not especially troubled by the bond market sell-off today, bearing in mind that 10yr yields are “up” to 1.784 and MBS 3.5’s “down” to 103-02, both things we probably wouldn’t have imagined saying a few weeks ago. Additionally, 3.5’s look to have encountered some support as they approached the 103 level.

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