MBS Pricing Snapshot

Just a quick note and update to the selling that emerged around 1pm. MBS have been able to do a good job of fighting back against that relative weakness so far. Whereas Treasuries have pretty much held those losses, MBS have clawed back a tick or two and are trading just over opening levels. We've seen a few positive reprices here as MBS hold their ground. 102-03 short term support in Fannie 3.0's.

It's 1pm on a Friday that many market participants would just assume not trade. With clear short term technical boundaries at 1.87 and 1.78, 10yrr yields have traded determinedly sideways in the broader trend of the past two session--essentially setting up camp for the weekend and ready to get back to trading on Monday.

Most recently today, we're seeing a big rejection of a break into the 1.7's and a ton of sell-side program trading in Treasury futures beginning at 12:56. This translated to Fannie 3.0 MBS getting capped out at 102-08 on the day and now back down to 102-04.

Current losses aren't enough to be concerned about negative reprices--at least not reprices that are motivated by trading levels (leaving the door open for serendipitous pipeline control reprices), but we would note the increased bias toward selling among black-boxes (algo trading). Some support has stepped in in the mid 1.81 area in 10yr yields, but not nearly to the extent that sellers stepped in to reject the break below 1.80 earlier.

Setting up for an ominous afternoon if this continues to be the case. We're not sure yet if that will be ominous enough to get MBS into more likely negative reprice levels, but we wouldn't tune out for the weekend just yet.