MBS Pricing Snapshot

Equities markets have largely been friendly for bonds today, but a big double bounce on the lows in the S&P right before and after the 3pm Treasury market close has bond markets looking a bit frazzled. S&P futures are up a quick 5 points and 10yr yields are up about 1.5 bps in the same time frame. Thus far, MBS have only shed 2-3 ticks in Fannie 3.5's from 104-19 / 104-20 to 104-17 currently.

After the initial scoot higher, 10yr yields aren't immediately bouncing lower, though MBS saw solid bid-side support at 104-16--same as this morning just before 11am. For all but the jumpiest of lenders and/or most sensitive situations, we'd probably keep the "time to think about locking" line in the sand at 104-16, as it has been since the first update this morning, but it's not out of the realm of possibility that one of the traditionally early-to-act lenders would justify a small negative reprice on such a move. Best bet, keep using 104-16 as a line in the sand, and adjust accordingly based on what you know about the lender in question.

Stocks fell quickly to the lows of the day as Facebook fell from $42.05 open to the IPO price of $38/share. Bond markets initially firmed up on the stock slide, but have since bounced back into the morning's previous range. Although Treasuries are still in line with what had been their strongest levels before the Facebook shake-up, MBS are less-than-thrilled by the volatility.

Fannie 3.5's briefly surged to 104-22, fell back to 104-17 and are currently at 104-19. Too soon to say how this will shake out, but bond markets clearly remain cognizant of equities. We'd continue to keep an eye on 104-16 as the line in the sand of increasing negative reprice risk in Fannie 3.5 MBS. Although one lender repriced positively already, we'd want to see a break above 104-20 sustained for more than a fleeting moment before feeling optimistic about seeing more.

The stock lever continues to provide some loose guidance for bond markets with a recent run to the highs of the day in S&P's translated to a Treasury/MBS test of the weakest levels of the day. Fannie 3.5's briefly hit 104-16, probably not enough of a slide for much reprice concern, but reprice risks could increase if prices fell back below. We'd also keep an eye on 1.7414 in 10yr yields, a "double top" so far today. This most recent bounce looks like it will stabilize if stocks stay away from retesting their highs, but importantly, it's not yet clear that they'll stay away. Vigilance is a good idea right now. To reiterate, if these technical lines in the sand break down (1.714 in 10's and 104-16 in Fannnie 3.5's), reprice risk is increasing.