MBS are off their lows following the 3yr Auction and have generally held around these levels for more than an hour, but are struggling to make it any higher.
10’s improved at the same time, falling from what were essentially the high yields of the day, close to their lows just now before hitting the floor before making any further progress. That keeps the lows at 8:18am and the highs at 9:51am intact as the day’s range as we cross the 3pm pit close.
This technical resistance combined with some spread weakness suggests tougher going for MBS as far as clawing back up toward morning levels, and it’s eerily similar to the first small selling spree and correction heading into the noon hour. “Eerily” doesn’t necessarily connote negativity here, but it definitely doesn’t connote positivity either (if anything at all). Bottom line: While negative reprices are less of a risk than they were, if you were holding out for a positive reprice into the afternoon, prospects are increasingly dim at the moment.