Heading into the 5pm "STOCK SELLERS JUST TOOK OF THE TRADING FLOOR" marking period....the FN 4.0 is trading -0-04 at 98-08 yielding 4.181% while the FN 4.5 is +0-00 at 100-29 yielding 4.391%. The secondary market current coupon is 4.328%.
Thanks to Fed and fast money buyers, rate sheet influential MBS coupon yield spreads vs. benchmarks are now a bit tighter after gapping out this morning. Here are static spread levels: FN 4.5 is +100.9/10yr TSY and +83.3/10yr swap. The CC is +94/10yr TSY and +77/10yr swap. (Tighter since books were marked at 3pm.)
Here is the FN 4.5 two day chart....
WHY THE LATE DAY RATES RALLY?
Did you see what stocks did before the close?
The good 'ol stock lever helped us out. After equities plummeted, the rate sheet influential 10yr TSY note fell from 3.42 to 3.38 and the FN 4.5 followed the leader. REPRICES FOR THE BETTER HAVE OCCURRED!!!
We can cite several explanations for floor falling from underneath stocks....but I think the findings published in the Beige Book were more than enough to warrant a little BIG PICTURE pessimism. HERE is our commentary on the Beige Book. I tried to let the text of the release do most of the talking. The theme I took from the Beige Book: the future is extremely uncertain and the entire economy is vulnerable to another downturn. The Fed cannot raise rates anytime soon....
Enjoy the reprices for the better.
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