I hate to keep saying FOR NOW...but it is what it is...the marketplace is in search of new leadership.
After an early session scare, volatility in benchmark Treasuries and "rate sheet influential" MBS coupons has stabilized. The below chart illustrates the FN 5.0s knee jerk SELL reaction to way better than expected 830am housing data and then a slow and steady recovery back to FLAT on the day. Notice the 100-24 support level (previous Friday high) held strong.
Here is further illustration of "taking our directional guidance from the gyrations of the yield curve". At MBS price lows and yield spread wides money managers were reportedly buyers of 4.5 and 5.0 coupons. At yield spread wides MBS investors decided to let bids fall a few ticks. When yield spreads moved into the "neutral" zone...the FN 5.0 went sideways. This is a more complicated (analytical) way of saying as benchmark TSY yields fall...comparable MBS prices rise.FYI yesterday I was using the 10 yr TSY note for my yield spread analysis, today I am using the 5 yr note to stay in line with the street's assumptions (FYI street has current coupon at 4.75%)
At the moment status quo has been restored...but both the stock and bond market are still quite unstable. More specifically, in regards to MBS, since we are at the mercy of the yield curve we will inform you that traders are "selling into strength" (profit taking). This forces us to advise: STAY ON ALERT things could get a little bumpy while an intraday range develops....
2s vs. 10s : 250.42
S&P: +2.25 at 926 (+0.25%)
Rate sheets are mixed and some are delayed. Remember: lenders most likely lost money over the last two weeks due to the wild shifts in interest rates (volatility). That said, some lenders will be looking to remain competitive, but at the same time recover lost income.
MBS Market Alerts
