Although the movement is fairly tame from a longer-term perspective, relative to the narrow 2-day range, today has seen some big swings. The most recent is upon us presently, with 10yr yields spiking to the highs of the day and MBS once again approaching the lows, all in light volume. Still, with Fannie 3.5's down to 103-18 / 103-19 range yet again, it represents another reversal in terms of reprice risk (with risks being weighted to the downside at the moment). In other words, negative reprices are once again more likely than positive reprices, but the narrowness of the range should keep most lenders disinterested in such affairs. Negative reprice risk accelerates if Fannie 3.5's move below 103-18.

Although a few lenders did reprice for the worse on the earlier weakness, risks have shifted on the bounce from lows to highs in just over an hour.

One lender has already repriced for the better, and we'd expect additional positive reprice potential to remain intact as long as Fannie 3.5's operate at 103-22 or higher. Most lenders would probably like these gains to stick around for a bit longer before getting on board, but reprices may start to trickle in fairly soon (again, assuming current price levels are reasonably maintained).

After the Fed's scheduled buying this morning, 10yr yields broke an important technical level at 1.90. For many, this presented an opportunity to book profits on longs set up in the 2.05-2.08 zone just a few days ago and/or to set up new short positions. Support at 1.94 is pretty solid with Bernanke and ECB's LTRO creating uncertainty tomorrow.

Either way, MBS have had to respond to some extent, coming off 103-23 highs in Fannie 3.5's and testing yesterday's modal support level of 103-18. They've done a good job of holding that support so far. That limits the possibilities of negative reprices, but it wouldn't be out of the question for some of the characteristically earlier-to-act lenders putting out a small reprice.

Even as this is typed, the bounce back in MBS continues to materialize. If Fannie 3.5's Continue to hold above the higher pivot point today at 103-20, reprice potential will quickly fade.

Statement of Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency Before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, "The State of the U.S. Housing Market: Removing Barriers to Economic Recovery".

Full Testimony