MBS LUNCH: Lenders Hanging In There....

Production MBS coupons have moved around a 17 tick range so far today. The price action has been lead by the indecisive behavior of the 10 yr Treasury note, which hit an intraday yield high of 3.16% at 11:05 am. At that time, the FN 4.0 moved to its intraday price low of 99-22. TSYs and MBS have since stabilized since stocks came off their intraday highs at 11:15am, MBS are however being outperformed by TSYs today (yield spreads wider)

Note: the currently quiet MBS trading envionment and the choppy trading range has given lenders plenty of reason to "reprice for the worse"... thankfully this has not occurred on a broad scale today (yet).

1 point to the lenders for hanging in there while we ride this MBS rollar coaster

Check out the correlation between the 10 yr TSY yield moving higher and the FN 4.0 hitting its low point of the day...

We remain cautious about the direction MBS will take for the rest of the day. Much is predicated on the day trading strategies of bearish TSY market participants (isn't everyone?) who are keeping a watchful eye over their technical indicators (mine are MACD and Stochastics) all while balancing the risk aversion preferences of stock traders. At the moment stocks are testing their lows of the day (Dow sold off 141 points since 11:15) and MBS are moving sideways, slightly lower on the day.

In the bigger picture....we continue to stand tall next to THIS THEORY and our long term 99-24 support level.

See how well it's held up so far?