MBS Pricing Snapshot

Fannie 3.0s (forget 3.5s please) made it as high as 105-09 just before 2pm--their highest intraday price ever. They're currently at 105-00, which would also be the highest closing price ever.

Most days, being 9 ticks off the highs is justification for negative reprice concern. Days like today are generally exceptions, though bear in mind there are limited examples of "days like today," to establish historical baselines.

As such, we'd keep the following in mind:

• Reprice risk is probably subdued at these levels, and in this environment.
• It's not out of the question that we would see a negative reprice, but at these levels, that would probably have less to do with MBS Prices than other factors such as pipeline control and risk management ahead of the weekend.
• It's quadruple witching day for futures/options expirations and we could still see some volatility
• If the lender with which you're considering locking has already released a positive reprice in the past few hours, it's less likely that you'll see another one before cut-off.
• If Fannie 3.0s fall below 105-00 and continue falling, we might entertain slightly increased chances of negative reprices among lenders who've repriced positively in the last 2 hours.

Today has seen the first directional breakout of a week's worth of narrow ranges. From trough to peak, Fannie 3.0s are up almost half a point on the day whereas previous days have seen ranges closer to a quarter of a point.

In terms of price levels, that's 11 ticks better on the day to 105-02--10 ticks higher than the previous all time highs. 10yr yields bounced supportively at 1.79 for the second time this week. Although volume has been relatively low all week, both these 1.79 ceiling bounces have gotten the best of it.

As we mentioned earlier, MBS likes it when the wide wide world of interest rates provides a predictable playing field. By continuing to hold that 1.79 level (there are other baseline indicators as well, but we stick with 10's for the sake of simplicity and continuity), 10's continue to NOT give MBS a reason to fear a sell-off of sufficient size to threaten lower coupon liquidity.

Several lenders have already repriced positively and more can certainly follow, though we'd remind you to keep an eye out for the "pipeline control" reprices that some lenders are known for.