This is more of an update than a statement about increasing reprice risk. It’s conceivable that lenders who priced right at the mid-morning MBS highs were beginning to consider a reprice when Fannie 3.0s hit 102-07 moments ago (as this was a 4 tick gap from the previous high of 102-11). Even then, the earlier weakness this morning acts as a sort of insulator against this relatively smaller shock (first drop of the morning was 102-15 to 102-07).
In other words, lenders who priced just after 10am at the MBS Price highs had the benefit of “knowing where we came from” earlier in the morning and likely didn’t price as if MBS had been flat at 102-11 all morning.
Additionally, the revisit to 102-07 has thus far, been met with a moderate bounce. It’s only 1 tick for now, but the move is shared by Treasuries and stocks. These are probably good places to look in the next hour and a half as we head into the 10yr Auction. 10’s have essentially revisited their highs of the morning at 2.05, and are currently at 2.0454. If they break higher, even if by way of a pre-auction concession, MBS could follow suit with a break of their lows, moderately increasing reprice risk.
With respect to those eventualities, “so far so good” for now, but just a heads up that we’re close to the edge, and the assessment could change fairly quickly if near term technicals get tested.