MBS Pricing Snapshot

What a world... MBS are at all-time highs, up about half a point on the day, and rate sheets aren't even a quarter of a point up on the day. MBS continue protesting: "this is all so... so sudden," and would probably appreciate a slower pace in the flight-to-safety rally. Even now, 10yr yields have gone flat to slightly higher since noon, and MBS have outperformed.

Ledges of benchmark stability provide footholds for MBS .

One notable reprice so far today, and despite the "limited incentive" environment, positive reprices are possible. We'd also warn that some lenders have a knack for negative reprices near the end of days like today for "pipeline control" reasons. We don't have any insider information in that regard, but just something to keep in mind if the lender in question is prone to such things.

Fannie 3.5's are in line with all time highs at 104-24. Fannie 3.0's have enough volume to mention, and are up 21 ticks on the day at 102-07. 10yr TSYs are down almost 12 bps at 1.6288. The Euro is in freefall, down to 1.238 now, German 10yr TSYs (Bunds) at 1.27.

Remember when 10yr yields hit 2.40-ish just over two months ago? Then remember when there was some uncertainty as to whether or not the 2.10-1.90 range was a thing of the past just before 10's broke from over 2.2 to under 2.1 in less than an hour? Pain Trade...

Remember when markets tentatively defended a 1.90% floor in 10yr yields in late April/early May, then retreated to defending the 1.80% floor as a "selling opportunity," only to have a bounce higher from 1.80% look like a good call for about 1 session before falling below 1.80% and never really making it back above, thus gently shattering the conceptions of a broader long-standing 1.80-2.10% range? Pain Trade...

Most recently, do you remember how 1.674 was the previous record low (not counting economic prehistory in the 50's, yes, we know) from 9/26/11 and that "surely," if 10's somehow magically approached 1.674 that it would be another great selling opportunity? And remember how we've seen 10yr yields give a half-hearted attempt at a bounce at 1.674 heading into 9am this morning an how we've since ratcheted lower, eventually grinding our way to a new low of 1.627 and current yields in the 1.63's? PAIN TRADE!

Maybe the reason that Treasuries keep acting to prove as many people wrong as possible is that folks are still thinking of them as Treasuries as opposed to how they actually end up trading: as "Diet Bunds." In other words, UST's are all about the spillover effect from European Benchmark debt. In that context, things aren't so painful. The real pain is in watching production MBS with little incentive to move higher from either the primary or secondary markets continue to grind into the ceiling near their all-time highs. For all the gains seen in Treasuries, MBS STILL aren't back to their mid-May highs... THAT'S painful (not the sort of pain we'd really complain about considering we're looking at all-time low rates, but still!). There are some charts showing how the two stack up in the MBS MID-DAY, if you missed it: