MBS Pricing Snapshot

Really not much more to it than the headline. No big block trades and no major market moving headlines to inspire the most recent leg up for MBS. Chunky, choppy momentum in a positive direction since the last major turning point referenced at 11:17am. That provided a few positive technical cues, but in general, we're just bouncing around in a fairly narrow sideways range bookended by 10yr yields at 1.863 and 1.785.

All that having been said, MBS are at or near their highs of the day with Fannie 3.0s down only 2 ticks now at 102-08 and 3.5's down only 1 tick at 104-26. Positive reprice potential is as high as it's been today, though still not enough movement overall to get a majority of lenders on board.

After a somewhat harried, low-volume run to what were technically the highest yields in over 3 months (technically, because we hit 1.863 today vs 1.862 on Thursday), 10yr Treasuries and MBS have returned to their morning trading ranges.

We're not eager to read too much into the move weaker, and general "risk-on" trading combined with low August volume seems to do the trick. But as far as the bounce back was concerned, this falls precisely in line with a big block trade in Treasury futures right at the 1.863 spike. It's been all downhill from there, as they say, at least as far as yields are concerned.

10's are back down to 1.833. Fannie 3.0s are "less bad," now down only sick ticks on the day at 102-04 (had been 101-31) and Fannie 3.5's are now down only 4 ticks at 104-24 (had been 104-19).

This greatly reduces the risks of negative reprices that emerged earlier and technically keeps a good thing going with respect to MBS holding their ground around a 102-00 level in Fannie 3.0s or 10yr yields holding (mostly) under 1.86.

Things continue to be light and susceptible to volatility regardless of headlines or scheduled events. Volume looks to be lightening up into the afternoon, as would be expected. We wouldn't rule out moves in either direction. into the close, but look to be trading inside the strongest morning levels just before 10am and the 11:18am weak point. Nothing's really happening/changing unless we're breaking one of those two boundaries.

Although the days trading range has been fairly narrow, MBS and Treasuries both departed from the morning's prevailing sideways trends and moved to their weakest levels of the day on a relative volume surge beginning at 11:08am. As such, we'd infer slightly elevated risks of negative reprices, but more so if levels continue to deteriorate from here.

Fannie 3.0s are down 10 ticks on the day now at 102-01 and 3.5's are down 7 ticks at 104-21. 10yr yields are following German Bunds higher after hours, currently up over 4bps to 1.8575. MBS levels aside, things likely get more serious if 10's confirm a break above 1.86.