MBS onward and upward so far this AM. Down in coupon bias at the moment...104/105 handles on fuller coupons are too expensive (absolute terms not relative) for MBS buyers

APRIL FN30_____________________________

FN 4.0 -------->>>> +0-08 to 100-16 from 100-08

FN 4.5 -------->>>> +0-07 to 102-03  from 101-28

FN 5.0 -------->>>> +0-07 to 103-04 from 102-29

FN 5.5 -------->>>> +0-04 to 103-23 from 103-19

FN 6.0 -------->>>> +0-03 to 104-12 from 104-09

APRIL GN30____________________________

GN 4.0 -------->>>> +0-09 to 100-21  from 100-12

GN 4.5 -------->>>> +0-06 to 102-06 from 102-00

GN 5.0 -------->>>> +0-07 to 103-20 from 103-13

GN 5.5 -------->>>> +0-05 to 104-01 from 103-28

GN 6.0 -------->>>> +0-04 to 104-15 from 104-11

Not too much standing in our way besides our own optimism. I am referring to the fact that the majority of the stack is trading over par and prepayment vulnerable coupons remain a day traders delight.  Not saying "up in coupon" is dominant...just pointing out that 103 handles on a 5.0 coupon will create some interesting relative value plays for MBS market participants (5.0 should be the target of profit seekers). This of course implies that traders are paying only the slightest respect to "ITSNBN",  but not enough respect to deter them from chasing riskier profits...especially now after supply concerns have faded and end of month index buying is adding support to the stack.

I know I know too much trading jargon...but it is what it is...MBS demand is more than adequate and prepay fears have been pushed off another month. Pretty much what I am saying is MBS is stable and happily going about its quantitative/relative value business. Expect more of the same ol same ol....traders take profits as spreads tighten (sell) and buy once MBS when spreads gap out....then take profits as spreads get too tight (when MBS rallies more than TSYs or TSYs sell more than MBS) This means watch TSYs and Swaps....but you probably do  not have a model that predicts duration and calculates convexity so all I would say to you is READ THIS POST ABOUT RATE SHEET CONSIDERATIONS to get a better idea of the challenges you face in the near future.

Plain and Simple: The stack is expensive and it would be  helpful if TSYs sold off so production coupons would have the opportunity to cheapen up on the curve...then maybe the next time originators attempt to sell their loans they will be met by willing buyers other than Ben Bernanke.  Yes...I am actually asking for a sell off!

Vic gave an enlighten open this morning...CHECK OUT THE MORTGAGE RATES WATCH BLOG. Good opening Post Victorino.

Next post will be in english.....