MBS Pricing Snapshot

10's and MBS are both inching into weaker territory and past recent technical pivot points. It's not a rampant sell-off by any means, and we still wouldn't expect to see a ton of reprices, but now we're expecting to see a few if current levels persist or get any weaker.

Fannie 3.0's at 103-25 and 10yr yields at 1.5274.

After much wailing and gnashing of teeth, bond markets are settling down inside previous territory. In fact, Fannie 3.0's scarcely moved lower than mid-range at 103-31 for the first 10 minutes following the announcement, nor did they move higher than 104-06 for a few brief ticks.

But 10yr yields just spiked up to the highs of the day, testing an important pivot from mid July as well as earlier this week at 1.52. MBS aren't happy about it at the moment, having moved down to 103-28. This is the reprice risk level that we'd set earlier and risks of negative reprices are increasing as long as we're holding here or moving lower.

WE DO NOT see any fundamental or technical reason for an additional sell-off here so we're still not convinced it continues. That said, some lenders (a small small group) might view this as negative reprice justification. That's the "heads-up" for now, and we'll certainly let you know if 10yr yields stomp higher through 1.52 and if Fannie 3.0's sink further.

In short, the Fed did NOT extend the ZIRP verbiage (still late 2014). They did reiterate that MBS reinvestments are ongoing and Twist continues as planned. No mention of QE3 or anything new, and a slightly more austere assessment of the economic situation, ALL of which is EXACTLY as expected.

MBS are all over the place... but are generally holding a supportive line at 104-00. If you have the fortitude, we'd forgo panic unless we break 103-28. We seem to be weathering the storm decently at the moment.

Your two best allies after the FOMC statement are past experience with the lender that you're considering locking with and the directional changes on the Fannie 3.0. 10yr yields can act as a cue for the broader bond market direction, but if the Fed specifically mentions MBS (which is possible but unlikely), we could see a good bit of divergence between MBS and TSYs.

Additionally, keep in mind that lenders are aware that big news is about to hit and will be quick to reprice negatively if we fall to (and more likely "through") the lows of the day around 103-28). Things have a tendency to move back and forth a few times following FOMC announcements, so adjust your reaction time accordingly to allow for knee-jerk market movements, and balance that against your past experience with the lender in question.

Perhaps it has something to do with the chance that MBS will be mentioned in the upcoming FOMC Announcement or perhaps it's just the light volume and favorable supply/demand environment, but MBS are now near their highs of the day after struggling to find support at 2-day lows earlier this morning. Fannie 3.0's are now back over the104 level, down only 3 ticks on the day.

In contrast, Treasuries are a bit worse off at the moment. 10yr yields aren't at their highest levels of the day, but recently tested them and are currently up 3.7bps on the day at 1.5069. We'd reiterate that volume is quite light so far and of course, would expect that to change after the FOMC statement at 2:15pm Eastern.