MBS aren’t back down to their lowest levels of the day, nor are Treasury yields back to their highs, but both are making menacing gestures in those directions as stocks continue to rally off their 2pm lows. Fannie 3.0s are down 8 ticks on the day at 104-03, 5 ticks off their afternoon highs and 10yr yields have moved up a mere 1bp from their best levels of the afternoon.
As can be the case at times, the actual change in prices between any given lender’s most recent rate sheet and the current time doesn’t justify negative reprices. That said, any continuation of this selling trend at the end of the day can still cause some negative reprice risk.
This isn’t a high probability scenario at current levels, especially if this proves to be a passing bit of late-day weakness, but prices would only need to look like they were headed for a retest of morning lows before several of the quicker-to-reprice lenders would be considering it. Some may be fairly close at the moment if MBS don’t bounce back convincingly, and quickly. Stock markets seem to be giving a fair bit of guidance for bond markets this afternoon. If that rally into the equities close continues, so too may our sell-off.