Just a quick update to moderate the negative reprice report from the previous alert. MBS stayed within the day's range and bounced higher following the 3pm close. 10's and MBS have improved into the "going out" hours (from 3-5pm), with Fannie 3.5's actually prodding the top of the day's range. Is it enough for positive reprices now? VERY small outside chance. Would be more possible were it not a Friday with volatile data waiting on the other end of a 3-day weekend. More important is that we're not at the same risk of negative reprices as we were previously.

MBS prices retraced to this morning's low range, hitting 103-06 before bouncing higher to 103-08 currently. Everything continues to operate in sideways ranges for both MBS and Treasuries, but we have seen one reprice for the worse as MBS hit their lows. We wouldn't expect most lenders to reprice at current levels, but it's a possibility for the more aggressive, quicker-to-act crowd, with the potential participants in negative reprices increasing if Fannie 3.5's dip below 103-06.

At the risk of jinxing the calm, slightly positive trading in bond markets, it's another classic case of a Friday Afternoon fade-to-black. 10's and MBS put in their weakest levels of the domestic session right at the open and have trended very gently in a more positive direction ever since. We'd emphasize the "gentle" bit, as the trend is arguably more sideways than positive.

It's as if bond markets--cursed by fate to weaken defensively ahead of the 3-day weekend and next week's events--go their day's work done early, and have simply punched out. Indeed, many shouts of "2.04" have been heard since bouncing higher from 1.90's yesterday. With that having been accomplished this morning, 10yr yields seem content to just sort of drift into the weekend, barring any headline surprises between now and the close. Yes, levels are improved from this morning--2.014 at the moment for 10's and 103-11 for MBS up from 103-04--but both sides of the market seem like they're being careful not to cross back over their respective pivot points before the close.

For MBS, that pivot is 103-10+, and for 10's, 2.01. As long as we continue to operate between those pivots and the morning's weaker levels, nothing is really going on except low volume ebbing and flowing whilst waiting for more informative events in the week ahead. As always, low volume can distort price/yield movements, so we'd asset that the jury is in on the aforementioned trading levels unless we note a significant increase in volume between now and the close.