MBS RECAP: Rally Holds

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12:39PM  : 
Despite Stock Rally, MBS Inspired by Treasuries to Hold Support
Quite a fascinating little display by MBS this afternoon… We mentioned 2.22 earlier in 10yr notes and it seems that MBS are on the edge of their seat watching that level. Each time 10’s approach, MBS weaken in line with lows of the day (caveat: “lows of the day” will refer to the MODE, factoring out the one huge swing just before 10:30). Then as 10yr yields bounce off the 2.22 ceiling, MBS tick up quickly, both in 3.5’s and 4.0’s (at current levels, it’s only a matter of time and a September MBS settlement before 3.5’s dominate, so we’re paying more attention than we have been today). Bottom line is that 3.5’s seem predisposed to hold near or above 101-00 and 4.0’s to 103-25. 4.0’s will actually look stronger right now due to the UIC preference into the afternoon. Chalk that up to a market that’s increasingly skeptical about gov-refi-program-induced payoff threats to higher coupons. (while we do hope that makes sense, we realize it might not. Please let us know so we can go into greater detail if necessary). 4.0’s are at 103-30, nearer the high side of their range, while 3.5’s are towards the middle to lower end of theirs, currently at 101-01. Still, it looks good enough for a reprice for the better from any lenders that were priced conservatively this morning, but that doesn’t become flat-out “likely” unless we get a cue that bonds are shifting from “sideways and contained” to “bullish.” That would probably look like a break of 2.18 in 10yr yields as an early indication.

11:16AM  : 
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Article source: http://www.mortgagenewsdaily.com/mortgage_rates/blog/226594.aspx

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