Just a heads-up: 10yr Treasury yields are at their 2-day highs, up 2.5bps on the day at 2.51. Fannie 3.5 MBS are still unchanged, but keep in mind that’s compared to yesterday’s saggy 5pm levels. Thus far, MBS have managed to hold support at 102-19. If Treasury yields are forced any higher, the support in MBS stands a good chance of breaking, which would lead to increased reprice risk.
All this is much ado about nothing at the moment as the trading range is narrow and volume is low. But we’d keep an eye on these range boundaries as today’s line in the sand between risk levels. In other words, some small risk already exists, but it’s on the verge of increasing if leakage in Treasuries spills over to MBS.