MBS RECAP: Modest Gains Belie Profoundness of Pain for Mortgages


The Beige Book report isn’t typically much of a market mover, and today is no different, but MBS and Treasuries were already off their best levels of the day heading into the data. There hasn’t been a pronounced response to the release, but we have seen a bit of shakiness in MBS, which seem to be eyeing the 2.10 level in 10yr yields.

This was true before today and has been reinforced by the trading so far. If 10’s break much higher than 2.10, MBS are at risk of getting leaky into the afternoon. So far, everything is holding sideways, but after moving away from previous highs, the situation seems a bit more tense now.

Also keep in mind “pipeline control” reprice risk over the next 2.5 days. The massive amount of positive reprices are giving lenders an opportunity to fill commitment buckets and they’ll likely turn off the flow when full enough. Not all lenders do this, but if you’ve seen that behavior in the past, assume it’s a risk this afternoon and the next.

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