MBS liquidity has left the building. Treasuries broke technical support in active trading and flushed through to higher yields quite quickly. There’s no news or event behind the move–simply late session tradeflow snowballs (what’s a tradeflow?).
Fannie 3.5s are down over a point at 99-27 and 4.0s down a point at 103-00. It’s impossible to say that these are actual price levels as buyers and sellers of MBS are so very far away from each other that trades aren’t actually being executed. Rather, quoted bid and ask prices are just flapping violently in the pre-NFP wind.
Traders are cognizant of the fact that the wind could become a hurricane tomorrow and not just for MBS, but Treasuries as well. Considering the 3pm “close” (when fixed income trade desks mark their end-of-day positions/levels), this move looks most like a pre-NFP defensive lead-off.
Even lenders who have already repriced, may do so again.