MBS RECAP: Late Day Weakness Despite Debt Deal Head-Fake

The potential reversal to the sell-off is turning out to be nothing more than a bump in the road. While we’re not yet back to the weakest levels of the afternoon, we’re certainly not hurtling gleefully higher in price simply because the White House talks ended without a stop-gap budget deal.

Fannie 3.5s are back down near unchanged levels on the day (up 1 tick at 101-08, but down a quarter of a point from morning highs). Again, there’s no dire implication here, but it does leave the door open for negative reprice risk, whereas there was a chance it would have been more firmly closed if the bounce back had more traction.

From here on out, it looks like the best-case scenario is a consolidative grind for bond markets into the close.

Article source: http://www.mortgagenewsdaily.com/mortgage_rates/blog/327598.aspx

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