Either lenders were indeed behind the curve when it came to earlier weakness or the better price offerings from earlier have caused enough lock volume to create a need for pipeline control as two negative reprices have just been reported. From another angle, MBS remain more than 3/8ths better on the day and have bounced supportively at levels confirming that, perhaps reason enough for us to have also seen a report of a positive reprice during the same time.

Bottom lines... You can likely already infer some indecision in markets from the rapid-fire alerts earlier, and now lenders are making opposite moves at the same time confirming the indecision. If we had to guess, we'd say that risks are slightly weighted toward reprices for the worse, but only based on the assumption that most lenders who would reprice for the better have done so. More accurate, would be to say that things can go either way, and a little knowledge about the particular lender with which you're considering locking or floating (their past habits with reprices, their position in the marketplace, whether or not they've already repriced, when they priced this morning, how close in line it was with what the rest of the market is doing, etc...) goes a long way.

There were a few harrowing moments in the past half hour as MBS pulled back from their highs of the morning, threatening to break 103-02 and 10yr yields threatened to break 2.0%. Granted, we might not be out of the woods yet, but we now have at least one good supportive bounce on both those fronts. The longer support holds at those levels, the more stable to reprice landscape becomes, with less risk of reprices for the worse, and ongoing possibilities of reprices for the better.

Following the historic release of the Fed's economic forecasts which included a historic decision to specify a long run inflation target (widely expected, but historic nonetheless), MBS are off their highs and 10yr yields have backed up a bit, but seem to be pausing before heading any higher than 1.99's. Fannie 3.5's are down to 103-04, but have certainly paused for some sideways grind at those levels (still up half a point on the day).

Still, we have to consider that things have shifted from the highs, volume is picking back up, and prices are more than 10 ticks lower from earlier levels. Some lenders could reprice for the worse if this weakness is maintained or worsens. Certainly not expecting widespread reprices for the worse, and even the characteristically early-to-act lenders might not pull the trigger, but A) the risks of that have increased, B) positive reprice potential is gone (unless someone is way behind the curve), and C) the situation should be monitored for any more losses in Fannie 3.5's as an indication of further reprice risk.

In other words, don't panic yet, but certainly pause the celebration for now.

2012: 3 Votes
2012: 3 Votes
2014: 5 Votes
2015: 4 Votes
2016: 2 Votes

Markets got the "2014 verbiage" against which they'd been hoping for, and then some. Indeed, this was the key change in an announcement that was otherwise fairly similar to the previous announcement. But instead of simply leaving it at 2014, the Fed specified "LATE 2014" which is adding some fuel to this relief rally (bond markets relieved that 2014 made mention and were somewhat hedging against with the recent back up).

Additional positive reprices are possible, as the gains have arrived in big volume and bring MBS back to their previous trend channel. Fannie 3.5's are currently up 14 ticks on the day at 103-03. 10yr yields are down almost 9 bps to 1.975. Things could stay a bit choppy depending on what Bernanke has to say in the Q&A portion of his press conference, which is starting presently.

The 5yr auction was slightly stronger than expected and slightly better bid than previous averages. The yield came in 1.3 bps lower than the 11:31:30 "when-issued" levels.

10yr yields and MBS rallied on the results with the former falling to test the broader ranger, as expected, in the mid 2.03's and the latter rising to 102-27. Although 10's are currently showing the nice bounce at the "as expected" trendline, it's not out of the realm of possibility for that resistance to fall, even ahead of the afternoon's FOMC-related events. If it does that, or merely stays close, MBS look like they have made sufficient gains for a few of the "early crowd" type lenders to consider repricing positively. Conversely, we'd expect lenders in general to be a bit more conservative than normal given the looming events.

Bottom line is easy though... If your finger is on the lock trigger today, we would lighten the grip a bit after this auction, but stay ready for a 102-19 break as an indication that the risk is "back on" for reprices in the other direction (in other words, 102-19 or 102-18 are good places to set automated lock alerts).

While it's certainly not the main event of the day, the upcoming 5yr auction (1.5 hours earlier than normal, at 11:30am today), could still impact the tone within the broader range boundaries ( 2.03 - 2.075 in 10's).

The average bid-to-cover ratio has been just under 3.0 and the last 4 auctions have all come in with lower-than-expected yields. The current expectation based on "when-issued" yield is hovering around 0.92, but that figure might change slightly before results are announced.

Despite the lingering effects of an over-built housing market, the continued difficulty to obtain financing for real estate projects, budget shortfalls at state and municipal governments and the anxiety surrounding the prolonged European debt crisis, there are signs that the U.S. design and construction industry will be improving. Corporate profits have returned to pre-recession levels and businesses have subsequently been increasing their capital spending, borrowing costs are at record low levels and pent up demand for commercial and retail projects factors into what projects to be a 2.1% rise in spending this year for nonresidential construction projects. The American Institute of Architects (AIA) semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters, also projects a 6.4% increase of spending in 2013.