MBS Pricing Snapshot

Fannie 3.0s trading has been choppy and sparse surrounding the 3pm Treasury close. Whereas Treasuries have marched steadily higher in yield since the big block trade leading to the best levels of the day around 1:43pm. Movement there has been quite linear and rather mild as far as bouts of weakness are concerned.

MBS, on the other hand, have seen far fewer ticks of movement. MBS joined with Treasuries to move toward weaker levels into the 2pm hour, but flat-lined at 103-14 and then 103-12 with minutes instead of seconds separating the trades.

Using 10's as a cue, 1.973 seems to be holding fairly well as a sort of ceiling for now, but at 1.969, we're close enough to be paying attention. There's a small chance of negative reprices here with MBS down around 4 ticks from the most lenders' rate sheet print times. Despite the mention of the "R" word here, we want to emphasize that the shape of the charts this afternoon is a factor of liquidity and 10yr yields would serve as a better barometer of any selling pressure (in other words, we haven't seen much selling pressure yet).

If bond markets were to close right now, 10yr yields would be at their best closing level since last Friday 1/25, and MBS would actually be a few ticks higher. Although there would still be a significant amount of ground to make up from there if we're to revisit earlier trading ranges, bond markets have done a good job of recovering last week's losses.

10yr yields were as low as 1.951 in the past half hour and Fannie 3.0s have been able to hold near their 103-16 pivot. Positive reprice potential is ongoing at these levels (several lenders just repriced), though the gains won't necessarily get every lender in the repricing mood depending on the time of the initial rate sheet.
The stock lever is very much in play and the current bottoming out in stocks is giving similar pause to the bond market rally, but as of now, there's no disconcerting bounce back in the other direction. We'll let you know if that changes.