MBS Pricing Snapshot

When the range is this narrow, it doesn't take much to move from the lows to the highs. Such is the fate of Fannie 3.0s, which just edged into their best levels of the session at 105-08 after hitting lows roughly 1 hour earlier.

There's been little by way of market-moving news or events to cause the shift, but it does coincide with a broadly connected "risk-off" bounce shared by stocks and Treasuries. S&P's took two stabs at breaking Friday morning's highs and failed on both accounts. 10yr yields shied away from breaking their Friday highs as well. All in all, we're left with the impression that markets have taken the safe route and decided to stay inside Friday ranges in relatively low volume.

Previously growing reprice risk fades from concern at current levels, and "stability" reprices would be more likely. That said, "no reprices" remain the most likely scenario unless MBS add a few more ticks.

Fannie 3.0s just returned to their weakest levels of the morning in a sort of slow motion sell-off beginning around 11:00am. As can frequently be the case, there was slight pressure on bond markets following the Fed's scheduled "Twist" buying, but Fiscal Cliff Headlines are definitely a factor as well.

No game-changers have been reported, but Bob Corker's call for Republicans to fold on the "top 2% tax" debate was taken as a sign of progress, lifting stocks and hurting bonds. Then roughly 10 minutes ago, a spokesman from the White House said that lines of communication remain open and the President believes a deal can be reached.

As usual when it comes to Cliff headlines, the more pronounced reaction is in equities markets, but we'd note that the overall reaction is almost undetectable. This is as it should be considering that nothing new has really come to the table. Still, there's simply been a small amount of pressure on bond markets that happens to coincide with the aforementioned events.

As for it's implications on reprice risk, outright price levels make that less than likely at the moment, but for a very small subset of lenders, not impossible. 105-03 is essentially the low of the session (one early quote sneaked in at 105-01, but 105-03 is bona fide). As such, and in conjunction with the fact that 105-07 highs were seen between 9-10am, we're right on the cusp of that "eighth of a point" difference from rate sheet time, which is often the threshold between negligible reprice risk and that which bears consideration.