MBS RECAP: Quiet Day Leaves MBS With Moderate Improvements


The prospects for negative reprices have increased only slightly in the past half hour, but have increased just the same. Treasuries were already heading higher in yield coming out of the daily round of Fed QE4 purchases from 10:15 to 11:00 with the latest motivation for weakness attributed to news that the House has passed the Debt Ceiling deadline bill.

Most of this was already priced into the market, but we have seen yields move up just slightly above their previous highs of the session, currently 1.8347. Fannie 3.0s have fell from 104-13 to 104-09, but look to be attempting to hold their ground at 104-10 currently.

All in all, this hasn’t been a swift sell-off by any means, and MBS remain 5 ticks improved vs yesterday, but still merits a “heads up” that prices now match the lows seen just after 9:30am. This isn’t enough movement for a negative reprice in and of itself, but it does take a few steps toward introducing that risk. As always, some lenders may be more jumpy about such things than others, but holding above 104-09 should keep reprice risks subdued for now. We’ll reassess if we break lower.

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