Rate sheet influential MBS prices have fallen over 10 ticks in the last five minutes.
From Curve Rallies on Tactical Short Covering. Loan Pricing Improved: The bond market reacted counterintuitively to better than expected Existing Home Sales data this morning. Prices rose in low trading volumes and open interest has fallen since Friday...this price action is indicative of SHORT COVERING (black box traders). From that perspective, I remind that we are operating in a marketplace dominated by tactical motivations (short term)...meaning the market is waiting for the Fed to announce more details on QEII and until that happens we are likely to see choppy interest rate behavior dominated by the short term strategies of fast money day traders.
After hitting an intraday high of 101-00, The December FNCL 3.5 is currently -0-02 at 100-20 . The December FNCL 4.0 is -0-03 at 102-31 after touching 103-10. The FNCL 3.5 has however found support at a familar price level just as the 10yr note has found support at a familar yield level (2.54%). Unfortunately the damage is done....these price declines are more than enough justification for lenders to reprice for the worse.
REPRICES FOR THE WORSE ARE HIGHLY LIKELY