MBS RECAP: Settling Into Holiday Weekend Drift


We mention the 7yr auction in the title merely to make note that it happened and didn’t really have an effect on the long end of the curve or MBS. The auction’s bid-to-cover was well within the range of recent results and the high yields of 1.203 is actually decent despite the 1.201 when-issued yield. 7’s had been outperforming other spots of the curve recently and into the auction, so the tepid results are actually rather neutral.

Fannie 3.5 MBS are down 4 ticks on the day at 104-09 after having been as low as 104-06 earlier. 10yr yields saw much higher volume earlier in the morning while bouncing on ceilings at 1.77 and then closer to 1.78. They’re currently at 1.767 and seemingly possess the will to hold steady or rally depending on whatever cues can be mustered from headlines or related market movement. With the latter in mind, we’d note that the stock lever has been fairly well connected for the past few hours, and that’s not too surprising considering the week is essentially over as tomorrow is an almost data-free half day.

Smooth sailing for now and maybe even a positive reprice from on of the “early crowd” lenders, but nothing justifying mass-scale improvements by any means. More importantly, risks of negative reprices are at their lowest levels of the day.

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