MBS RECAP: Outperforming Treasuries, But Slightly Weaker Overall


Very little has changed from this morning as Treasuries continue to grind into weak-side support levels (around 1.67 in 10’s) and MBS continue to try holding on to 104-29 and 102-11 as support levels in Fannie 3.5s and Fannie 3.0’s currently. So far this afternoon, all of those support levels continue to hold and trading ranges have narrowed from already narrow opening levels.

The afternoon looks a bit less certain and feels a bit more vulnerable to some old-fashioned Friday afternoon leakage. We highlighted a few trendlines on Fannie 3.5’s, 3.0’s, and 10yr Treasuries to serve as sort of guideposts as to how things might transpire.

We’ve seen one negative reprice from a “usual suspect” but we don’t quite see the current level of weakness as justifying that (just like we didn’t see the previous level of strength justifying their earlier positive reprice). So said “usual suspect” merely returns to equilibrium while the rest of the market continues to do nothing.

Any changes to that outlook are likely to occur in low volume and be purely incidental and not at all indicative of the week ahead, unless otherwise noted. Bottom line, reprice risk is minimal but could arise positively or negatively according to how the aforementioned technical levels hold up. Very slow and uneventful otherwise and next week is a new week (with limited data, Treasury supply, and more Euro Summit meetings).

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