the 5.5 october coupon is towing the line at yesterday morning's high resistance levels. this line is actually more of a range between 100-25 and 100-27. We've dipped below 100-27 but have not yet violated 100-25.
There is a slight risk that more conservative lenders will reprice for the worse. Currently we are at 100-28. If today's relative thin trading range is enough to convince Asia that we've worked out our volatility, it could produce an asian bid overnight thus bringing prices back up. The nice thing we ARE NOT seeing is a dramatic drop off back towards the 200 day moving average. This suggests that mid to long term float clubbers should make it home without needing to call the ambulance. The more Lehman brothers loses today (down 36% right now after Korean investors backed out of their deal) the more stocks could continued to be dragged down.
Right now, the market is throwing up signals that yesterday's tightening was overexuberant as spreads are way out today. To whatever extent latent psychological impacts can tighten, combined with continued press from the fed's intervention, this is MBS positive in the long run.
As I've been typing the 5.5 has ticked up to 100-30, further adding support to floaters. Be warned that there can be some mid day reprices for you short termers, but without a massive drop below yesterday's support levels and moreover towards the 200 day moving average, it is still "too soon to tell" if the float club will be cancelled later in the month.
Oh man... If only I could get the typing speed up, I wouldn't have to give you frequent intra-post updates, but I don't think you'll mind my saying that as stocks conitnue to fall under more pressure we're now seeing october at 101-00.
STILL! Be careful! Trading is choppy and thinkgs can change at a moment's notice. Long story short, if you have a week or three before docs, I think float clubbers can keep the faith.