Updates

Finally!  A potentially market-moving tidbit crosses the wires.  Geithner is scheduled to testify tomorrow at 10AM before a congressional oversight panel.  It's possible that nothing of note will be said and no market impacts felt, but against the backdrop of this data devoid week, we'll take anything we can get.  Plus, whenever someone of Timayyyy's ilk speaks on a week such as this, the normally significant effects can be made even more so.  So at least we have some cause to be awake tomorrow morning as opposed to absolutley none.

MBS Price Action

The stable, upward, and narrowing trading range (decreasing volatility) persists as we cross into the afternoon hours.  One can almost "see" the post holiday turbulence wear off in the AM as we get back to business as usual throughout the day (though not in terms of volume!  more below...).  And what could be more usual than a ton of spread widening in the face of treasury rallies?  Indeed that's the case at the moment as no matter which benchmark one looks at, Tsy's are outperforming significantly.  For the sake of comparison:

5YR UST ------- +0-15 --------- (1.786)

10YR UST ----- + 0-31 --------- (2.832)

Compare that point and half a point gain against the MBS stack at the moment:

FN30_______________________________

FN 4.0 -------->>>> +0-08  to 100-01  from 99-25

FN 4.5 -------->>>> +0-06  to 101-28  from 101-22

FN 5.0 -------->>>> +0-03  to 103-00 from 102-29

FN 5.5 -------->>>> +0-02  to 103-24 from 103-22

FN 6.0 -------->>>> +0-01  to 104-19  from 104-18

GN30________________________________        

GN 4.0 -------->>>> +0-09  to 100-08  from 99-31

GN 4.5 -------->>>> +0-08 to 102-06 from 101-30

GN 5.0 -------->>>> +0-04  to 103-18  from 103-14

GN 5.5 -------->>>> +0-03   to 104-00 from 103-29

As you can see, the daily change in MBS, although nice and positive, is appreciably less than that of tsy's.  (Tend to compare shorter duration MBS such as 5.0's+ to shorter duration tsy's like the 5yr, and longer duration MBS like the 4.0 versus the 10 YR tsy).

Originator supply has been healthy today and is said to be over $1.5 billion.  Most of this has been soaked up by, who else, the Fed.  With respect to Friday's comments on overseas buying being a factor (again, finally), they are indeed sticking to norms and concentrating on Ginnies.  None of this, however, may matter much as low volume could be distorting reality.  We're standing around 50% of the 30 day average volume. 

The 4.0's have developed a sort of "price ledge" just under PAR.  We'll draw a trendline on the chart if that holds for another hour or so.  Whatever the case, volatility may pick up a bit after the stability seen in the late morning and early afternoon.  That's always a risk with low volume.  If, however, we hold at least these levels, more and more lenders should start to give back some love into the afternoon.

Charts

Here's the current 4.0 on the day, with the 10yr tsy and stocks below. 

Locking and Floating

Intraday Floating remains en vogue as we continue to hold the range.  Mid to longer term locks are probably better considered if A) we rally appreciably this afternoon and B) Lenders pass on the gains.  Failing that, we should still be more concerned with the long term floor around 99-20.  Most lenders haven't priced better, if at all, from Friday's levels when prices neared that floor.  So there's no point in locking prematurely until lenders cough up some benefit beyond that level.  This may be the default advice for the rest of the week, but as one blind man said to the other, we'll see what we'll see...