After rallying directionally from 11am, both Treauries and MBS have broken from those trends and gone sideways into 3pm. To be sure, some positive reprices may still be out there, but if you've already seen one, this is sort of a heads-up that you're not likely to see another one from the same lender. Also bear in mind that some lenders (only a select few, really) have been known to reprice negatively on afternoons like this where we've rallied for most of the day and begin drifting off into the close.

Whatever the case, Fannie 3.5s are back down to 103-09, getting closer to the 103-07 / 103-08 pivot zone. 10's are back into negative territory, up less than a bp at 2.187, but looking like they want to break higher. "Stay frosty" = stay cautious if you need to be. No negative reprice risk yet based on price levels, but the rally is over and the sideways grind is at risk of slipping a bit. (hide)

The 103-07 to 103-08 zone held up as resistance to multiple attempts to move higher before finally giving way just before 2pm. As we noted, this is a level that has been clearly more likely to cause bounces than allow breaks, and today is no exception (only 1 break vs too many bounces to count). As such, trading activity picked up in MBS shortly after the break and prices followed through into higher territory. Staying in that territory for more than a few minutes has allowed for widespread positive reprices.

The "zone" now serves the opposite role, where it's more likely to act as support vs falling prices. If it's broken again, that would be the cue to lock em up for the day (if you're planning on locking or not otherwise doing so after this batch of reprices). (hide)

Although we do have one report of a positive reprice, MBS will be hard pressed to maintain (or improve to) levels that suggest more of the same. Not only does tomorrow's important data suggest caution among lenders, but price levels themselves are just now getting back to that important pivot zone in Fannie 3.5s (103-07 to 103-08). These price levels have been more likely to result in bounces vs breaks when approached from either direction of late (though breaks obviously CAN happen).

Even if it does happen, we seem to be encountering resistance to the idea so far while 10's similarly struggle with a meaningful break into the 2.17's (stuck at 2.18-ish right now).

There is no significant news or data motivating the return to unchanged levels for bond markets, but the juxtaposition of rising stock prices implies the possibility that we're simply seeing some cash come off the sidelines whereas yesterday afternoon's FT article may have had the opposite effect. (hide)