Activity in the fixed income sector remains subdued. Trade flows are still balanced while volume remains lackluster. The 10 yr UST note yield has bounced between 3.72 and 3.70 for the last hour or so....
This "bouncing around" is the market testing its own willingness to move TSY yields lower. Stock markets are showing further signs of weakness so dont be surprised if this "testing of the range" ends up evolving into a move towards the high 3.60s...which would be good for MBS and rate sheets. A few lenders might be willing to pass along reprices for better if that occurs...and HOLDS...which is plausible but dont get too excited as the short term trading mentality (profit takers) should keep lenders from republishing new rates. Supporting this skepticism is the fact that rate sheet influential MBS/TSY yield spreads have gapped out a few ticks since reaching mid-morning tights. This relative weakening (wider spreads) may be a function of mortgage investors attempting to get ahead of/anticipating that traders will eventually force benchmark yields higher to make room for more supply of debt (remember $104bn in TSY notes to be auctioned this week). Dont panic...the FOMC meeting is keeping a lid on yield chasers...
2s vs. 10s: 255bps
MBS Market Alerts
