MBS Pricing Snapshot

Treasuries and MBS hit their weakest levels of the day at 12:50pm, bringing them close to 'unchanged' on the day. Sinc then, they've been heading back into positive territory with MBS currently trying to get over the 102-22 pivot point shared with yesterday's supportive early afternoon trading. 10yr yields are back down to 1.94 after hitting 1.975 earlier, and stocks have been peeling off their highs from around the same time as well. Negative reprice potential is probably mostly dried up by now (though some lenders come in way late from time to time), and positive reprices are an outside possibility for 'quicker-to-act' lenders who had already repriced for the worse earlier (one reprice already reported).

There's still no standout culprit to blame for the craziness seen in the MBS Market from 10:50 to 11:20am, but it was clearly an MBS-specific event, and one that has pulled Treasuries along for the ride. It was also enough to justify a few negative reprices already, despite the fact that MBS are still in the green.

As much as we'd hope that continues to be the case, markets may be scared (and scarred) by recent past precedent which has seen morning stability and/or gains, give way to afternoon selling sprees (usually starting before "afternoon" proper, with 10am being a not-uncommon turning point.

With that in mind, MBS are getting "weird" again with bid side quotes whipping around in the same violent fashion as seen at 10:50am. Some of the reflected price is distorted by that, but some of it is real. Even if we hold previous lows, the volatility keeps negative reprice risk on the table. Whether or not we hold previous lows is uncertain. 10's are now officially trending weaker since 10am, currently up to 1.9679. Fannie 3.0s are up only 2 on the day at 102-18 currently. That may be higher than previously, but we're heading in the wrong direction and reprice risk is certainly higher.

'Mystery pop" is not a new brand of popcorn, but rather, refers to an MBS-specific selling spree underway currently, and one that defies readily accessible explanation. We'll update you when we know more about it, but for now, Mortgages are leading the rest of bond markets into weaker territory. Fannie 3.0s are off 6 ticks from highs--enough for negative reprice risk to be slightly elevated--and now up only 3 ticks on the day at 102-19. 10yr yields are up to 1.954, draged up almost 3bps in the past 10 minutes. Stay tuned...