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At Best Levels Now; Positive Reprice Potential Increasing
Posted to: Micro News
Tuesday, September 10, 2013 12:32 PM
Any negative reprice risk that had been growing into the 11am hour is off the table now. MBS and Treasuries have both turned around and moved to their strongest levels of the day.
A good batch of short covering swept through Treasuries starting roughly 40 minutes ago. That created some positive momentum that may just now be subsiding. The epically large Verizon bond offering is certainly having an effect on the Treasury complex with longer maturities currently less afraid of the competition than shorter maturities (Verizon is offering corporate bonds based on Treasury rates plus margins of roughly 165-265bps for 3 to 30yr maturities). Combine that with impending auction supply in the short end and 2's and 3's have been the least bullish coupons today (you can click on 3yr Treasuries and 10yr to see the different shapes on the charts today).
MBS haven't actually kept pace with 10's as well as they have with 5's. But they have responded to the positivity from 11am to 12:30pm with a move from their lows of the day to the highs. Lenders may be somewhat hesitant to reprice ahead of the auction, not to mention the volatility, but positive reprices are now more possible than negative reprices.
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