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Negative Reprice Risk Increasing Slightly; Far From Full-Blown
Posted to: Micro News
Thursday, September 26, 2013 12:25 PM
Depending on when your initial rate sheet came out, the lender in question may be looking at a loss of 1-2 ticks so far (not enough for reprice risk) or 4-5 ticks at the very most (just enough to be entering negative reprice risk territory).
Treasuries are now trending sideways over the past 3 days and there is some concern that 10yr yields bounced at 2.62 yesterday, even if they haven't stampeded quickly higher to yesterday's upper yield limits.
To reiterate comments during the past two days, we've been expecting bond markets to express more of an innate desire to level-off here after Tuesday's rally. 10yr levels are currently exactly in line with Tuesday's post-rally levels (2.646).
This won't necessarily have dire consequences for MBS, but we're just weak enough now that negative reprices are a small risk for a very small group of lenders. Fannie 3.5s are down 6 on the day at 101-17 and Fannie 4.0s are down 3 to 104-20. Fannie 3.5s will now be reflecting as the current coupon upon refreshing the dashboard or initially loading.
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