Following the 30 yr bond auction, rate sheet influential MBS coupons have traded in a volatile range as the 10 yr TSY attempts to illustrate its intentions to maintain bullish momentum. At the moment the FN 4.5 has hit an intraday low of 100-16, 10 ticks lower than the intraday high, which will force lenders to reprice for the worse!
Notice that as the S&P failed another test of 885 and began to tick lower, the 10 yr note began to rally, however when the S&P broke 885 resistance, the 10 yr note reacted by changing course AGAIN! We still believe the 10 yr will hold its recent bullish momentum, but are patiently watching the stock lever for an indication of things to come. That said, we would expect 3.41% to continue to moderate losses and for a correction to eventually occur.
Dont Panic if you've already been hit with a reprice for the worse. However if you have not seen a reprice yet, a correction does not imply that lenders wont republish rate sheets...therefore if you are floating short term deals hitting the LOCK NOW button may avoid further loss of yield spread premium (base price + servicing!!!!)
Remember what we said about MBS investors being hesitant, nervous, and skittish of any weakness in benchmarks. Knee jerk reactions...not a signal of a shift in sentiment.
2s vs. 5s: 138bps
2s vs. 10s: 246bps
2s vs. 30s: 336bps
5s vs. 10s: 109bps
MBS Market Alerts
