If you've seen a few reprice alerts, had your pricing suspended or just want to know what's going on because the line on the chart moved in the wrong direction really fast....we've just experienced some month-end/quarter-end/year-end (Japan) volatility.
MG isolated a DJ report :IMF No Requests for Financial Assistance from Portugal as the only major news on the wires at the time of the MBS price dip. We don't think this was really the market's underlying motivation for the sudden change of direction, but we do know that soon after the headline hit there was a rush of short selling in the 10-yr TSY futures contract. And we also know the "short base" has steadly grown over the past few weeks (short base = number of open short positions in the 10-yr contract. The bears!) Logically, with 10-yr prices rallying over the past 24 hours, the "short base" would feel pressured to defend its bearish position as a continued drift toward higher prices/lower yields would trigger a shift in trading technicals that forced bearish bond investors to exit their short position (that would lead to a modest amount of snowball buying!).
That is how we'd spin it anyway...especially with technicals still leaning slightly in favor of the bear camp. The IMF headline might mean more than we thought but the market has been somewhat "ho-hum" about headline news lately. We'll have to keep it on our radar, just like we're keeping tabs of hawkish and dovish Fed speaker schedules and auction cycles.
Either way, the FNCL 4.5 MBS coupon has bounced back and reprices for the worse are off the table for the time being. Look where the 24-hour rally has taken production MBS coupons, we're running into range resistance at 101-28 again..
Very few reprices for the worse have been reported.I've got the current coupon basically unchanged on the day at 4.175%. Tighter vs. 10yrTSYs, 10yrIRS, and 5yTSYs.
Anyone trying to lock up a deal or add some coverage before originator compensation rules officially go into effect tomorrow? Who expects to see new look rate sheets?