MBS Pricing Snapshot

Fannie 3.5s are down 12 ticks from recent highs. On almost any other day in history, that'd be good for widespread negative reprices. Today, however, the "widespread" part is less of a certainty, though we may be at risk for a few. That will depend on how recently the last reprice came in and how nimble the lender in question normally is.

Bottom line, there's some growing risk as the rally abates, but no massive, panicky afternoon sell-off (Fannie 3.5s at 100-00 still 24 ticks off morning lows). Bigger picture, it's a negative daily technical picture given that MBS were generally capped by Friday's lows and that Treasuries were unable to break back below Friday's high yields, so we wouldn't assume today marks "the turn" in rates just yet.

Much like the Grinch returned presents to Whoville after experiencing varying levels of atrial and ventricular growth, Dallas Fed Pres Fisher--despite the fact that he didn't make too much sense--at least managed to say things about the current state of affairs that were detectably less damning. Apologies if that sentence requires multiple re-reads, but to summarize: Fisher spoke. Coulda been worse...

Volume and movement clearly came in to both equities and bond markets in the recently familiar "cash off the sidelines" sort of way. Stocks and bonds improved together, and are continuing to do so. MBS is on the same train (or perhaps it's a sleigh a la Grinch?).

In for a dime, in for a dollar on this analogy, so let's just say that although Bond markets aren't happy about having antlers stapled to their head, at least they're heading in a more optimistic direction in the short term (hope that made sense... if not, watch the Grinch...the old animated one).

10's are down to 2.555. Fannie 3.5s are closing in on 101-00, currently "only" down half a point at 99-31, and Fannie 4's are down 15 ticks at 102-31. Positive reprices are an ongoing possibility.

Since bottoming out shortly after the open, MBS have been scratching, biting, and clawing their way out of the pit of despair. Versus earlier lows of 99-08, Fannie 3.5s are up to 99-22 now (which was enough for one lender to reprice already).

10yr yields continue making lower highs, now down to 2.597. The first resistance pivot is at overnight lows of 2.58. From there, it's a woefully big 'next step' down to 2.51-2.52 at Friday's high volume 3pm highs. One step at a time though...

For now, we have the consolidation we were looking for--or at least the early stages of it. There's no guarantee it will continue, but for now it's sufficient for some positive reprice potential for some lenders. Most, however, will need more of two things before pulling the trigger: time and gains.