In what has been a slow morning of MBS trading, our "rate sheet influential" coupons have played follow the leader with benchmarks.
After testing summer price highs earlier in the session, the FN 4.5 is currently trading +0-05 at 100-26.
Here is zoomed in view of the FN 4.5 testing summer price highs...
In line with the concept of "rate sheet influential" MBS taking directional leadership from TSYs. The 10 yr note is poking and prodding at summer yield lows.
This chart should look familiar...
The previous August yield low, 3.37 has been a powerful pivot point today. It should be more obvious why we have been targeting 3.36..
Our main weakness remains the effects of the stock lever. If stocks go higher...expect to see profit taking in the rates market. If stocks keep bouncing around flat for the day, we still might see profit taking anyway....but stability should return shortly thereafter as "buying on dips" occurs.
In regards to MBS specific weaknesses...originators looking to lock in pipeline profits remain a looming threat to price stability. However, if TSY appreciations hold, this event shouldnt be noticeable to most originators (weakness will be in yield spreads).
In related markets, stocks are essentially flat while the dollar is weaker and oil, after plunging deep into the $67 handle is now trading at $68.40.
Rate sheets are slightly better this morning...still seeing a gap between 4.75 and 4.875.
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