Some late session buying (before 3 pm close) has added momentum to our outlook for lower benchmark Treasury rates this week (5s and 10s). Why do we say this? Right at the closing marks the 10 yr hit its intraday low (highs for price)...
So, because "rate sheet influential "MBS coupons continue to take their directional guidance from the fluctuations of benchmark yields (TSYs!!!)...this implies we are feeling more confident about the outlook for lower mortgage rates this week. The only downside to this positive position is that we would have liked to see more volume today. That said while the TSY trend slowly adds intensity we will advise that this bullish bias (barely) is short term and subject to profit taking(intraday indicators = overbought), CPI data, the President's regulatory reform plan, and the Treasury Department's announcment outlining upcoming auction amounts (2s/5s/10s next week). <--- These are likely the culprit behind the low volume trading environment. (Selling strangles anyone?)
The FN 5.0 "current coupon" has traded in comfortable range since the early morning "facemelting" rally...we are not complaining though, in fact we welcome this sideways stability after the recent run up in volatility! Remember: Lower market vols help lenders manage their pipelines with a higher degree of efficiency and also allow for more aggressive pricing strategies. If you missed our commentary on lender pricing "stategery" (HAHA I dont know why this is so funny to me but it is)...read MBS LUNCH
Here is a longer term look at the FN 5.0. We havent seen these price levels since June 5...
...and an even longer term look (appended by request of tbickett)
Ewww...that certaintly makes you feel like we have a ways to go doesnt it?
2s vs. 10s: 249bps
FN 5.0/UST10YR YIELD SPREAD: +90/10yr
MBS Market Alerts
