MBS RECAP: Markets Do Nothing With Data. Bring On The Greekend


First of all, this isn’t a “time to panic” alert, but more of a heads up on the evolving situation into the afternoon hours.

Volume is down and benchmarks look like they’re set up to coast out into the weekend uneventfully, but there are a few considerations that suggest maintaining some level of vigilance on any loans you might lock today.

First of all, there are the normal considerations based on market movements. In this case we have 10yr yields trying to hold a narrower range just under 1.60 on the upside. We think that if they can do that, it hearkens a relatively calm ride out for MBS. As for MBS themselves, take a look at the 3.5 chart on the dashboard to see the uptrend heading into the afternoon, and broken on the downside shortly thereafter. The logical horizontal pivot just under 105-00 was tested and held up well, leaving us in “so far so good” mode at the moment. But should 10’s break upwards of 1.596 or should Fannie 3.5’s fall below 104-30, risks would we marginally increasing (though the overall range is fairly narrow, so more conservative lenders might not even really care until 104-28).

The second consideration is the “pipeline control” reprice risk. Depending on the lender, rate sheets are either at their BEST EVER levels or close to it. Certain lenders are more predisposed to it than others, but be cognizant of the risk of negative reprices EVEN IF MBS are holding their ground or improving.

all in all, we’re doing well at the moment, and if nothing much changes, it looks like a surprisingly normal, calm Friday afternoon on cruise control. That said, there’s probably not much reason to hold out for positive reprices unless you’re planning on floating through the weekend, and let’s be realistic…. If you’re planning on floating through the weekend, you’ve already accepted the possibility of an infinitely bigger market movement than we’re likely to see today.

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