MBS Pricing Snapshot

Even though volume remains relatively low, and despite the fact that current movements aren't attributable to any headline causality, tradeflows continue to usher bond markets into progressively weaker territory ahead of the early 2pm close.

The most recent ratchet-like movement takes MBS into yesterday's pre-ISM trading range. This increases chances of negative reprices. Fannie 3.0's are down 6 ticks on the day at 102-25 and Fannie 3.5's are down 5 ticks at 105-09. Even at these levels, reprices won't be widespread, but they are a greater risk than the first bout of weakness about 2 hours earlier.

Treasuries have been heading for the door in more ways than one since coming in this morning as 10yr yields have ticked neatly and rhythmically to higher highs and higher lows. Currently 10's are up 3bps on the day and while MBS have largely been able to resist the negativity, they're reluctantly following to enough of an extent that it brings Fannie 3s and 3.5s to their weakest levels of the day. The former is down 4 ticks at 102-28 and the latter down 3 ticks at 105-11.

We get the sense that bond markets in general are themselves, reluctantly following the rally in equities, but certainly trying to do more to stay flat than to sell-off. Volume remains light and the weakness continues to be more a factor of timing and flows than of the strong Factory Orders report this morning.

All that notwithstanding, it could result in elevated risks of negative reprices among a small group of fast-acting lenders, but we'd emphasize that losses are minimal and could be close to nil depending on the time frame of a particular lenders initial rate sheet.