The 3.82% support level is doing its job...
...and bids on the FN 5.0 have stopped falling. Awesome.
Awesome that losses have moderated. Not awesome that reprices for the worse were definetely reported.
Originators have been heavy sellers today...so mark today's price levels and compare them to the future pricing strategies of lenders (lenders locked in loans today/pricing will be generated off of today's bids). The supply offerrings from originators have served to widen up MBS/TSY yield spreads...this means TSYs are outperforming MBS today because of a lack of demand for "rate sheet influential" MBS. Wider yield spreads imply MBS coupons are cheaper vs. benchmark TSYs, so in the event that TSYs rally in the near future there is room for MBS coupons to outperform (rally more/yield spreads tighten). Its hard to believe much love will be shown to our current coupon MBS unless a more definitive range develops...
A portion of today's trading activity is as a result of the hedging activities of the convexity crowd (servicers paying)...some of the movements are based upon day trading strategies and a lack of liquidity. Remember: day trading is expected to pick up between now and Fed day, furthermore the upcoming end of the second quarter is a likely culprit of fast money strategies. As we near June 30 (quarter end) trading flows will slow and liquidity will dry up as money is moved to sidelines in an effort to pretty up balance sheets with cash and risk free securities in the short end of the yield curve.
Status quo for now. STAY TUNED though...after hours trading may not be friendly.
2s vs. 10s: 258bps
MBS Market Alerts
