It has been a very busy morning for mortgage market participants. Servicers are straight up selling MBS while originators are also dumping whatever supply they can...to protect pipeline profits (whatever is left in the pipeline that is). The Fed was quite supportive of both of these accounts...yes the Fed is still around. After the rate sheet detrimental sell off (subtle reminder for Ben)....some retail accounts were reportedly doing some speculative "down in coupon" buying. This is purely based on how deep in the discount "rate sheet influential" MBS coupon prices have fallen. As the session has grown shorter...volatility has progressively calmed. Check out the wild ride we have been on all morning...this is why lenders have been slow to publish rate sheets this morning. Over a 100bp range this AM!!!
The 10 yr TSY note bounced off 3.89%...hard...almost all the way back to pre-data release yields. A good amount of profit taking has been seen. Over the past hour a range around 3.85% has developed....traders will be looking for any weakness in stocks to set up for next week's TSY auctions ($65bn in 3s/10s/30s). Yesterday we believed the range would moderate...unfortunately the range cant seem to figure out where it wants to settle. Still waiting on that to develop...then we will have a better idea where the MBS coupon range will form. (FYI MBS/TSY spreads holding near +90/10yr TSY...that is the only consistent range lately)
The steepness of the yield curve, as measured by 2s vs. 10s, gapped out to 281bps when the data hit. Since then the yield curve has flattened out considerably...2s vs10s currently at 259bps...thats a big swing!!! No thanks to the 10 yr note though (see above). No no....it was all the 2 yr note selling off...the UST2YR TSY note yield jumped 22 bps in a matter of minutes (swap spreads too tight!) A sign of the market fleeing "risk averse" assets in favor of higher returns in the stock market...ugh what a punch in the junk to the "flight to safety" trade....
Stocks have been all over the place too!!! Stocks are hovering around "positive for the year" levels...what a turn in sentiment!!!!
Look deeper in the Non-farm payrolls data...there are some not so "warm and fuzzy" tidbits in there...have you seen them yet?
SIGN OF THE "BADNESS"....CNBC IS UTILIZING THE "OCTOBOX" THIS MORNING. MMMM...I love listening to eight people argue at once!!! Watch the money instead of the talking heads....
MBS Market Alerts
