To be clear, at least one positive reprice has already come across, and the possibility lingers as MBS continue to trade a narrow range at their highs of the day. All that having been said, those highs aren't even an eighth of a point higher than the levels that prevailed during most lenders' rate sheet print times. That means we're limited to a small subset of lenders who tend to offer "stability reprices."

Although those types of reprices aren't necessarily the kind of thing we'd hold our breath for, neither is the market selling off or even displaying any tendency toward weakness at the moment. That said, it's not displaying a tendency toward much at all! Prices have moved maybe 1 tick in either direction since before noon--10yr Treasuries, less than .5bps in either direction over the same time.

Meanwhile, stocks are falling, but haven't dipped below Thursday's levels. That's something that 10yr yields are only dreaming of at the moment. Bottom line, there's a sense that markets are holding their collective breath, waiting for the other shoe to drop.

Conclusions:
On the positive side, at least we're in the green. On the negative side, MBS have stopped making gains (which was laid out as a possible 2-day trend after fresh 2-day highs this morning) and instead have been bumping their head into a 104-09 ceiling in Fannie 3.0s. Same story with 10yr yields, but "floor" instead of "ceiling." 10's version of resistance is roughly 1.89.

After last week's major selling spree for bond markets, Asian and European trading sessions offered few reasons to be hopeful or pessimistic about the day ahead. 10yr yields moved down as low as 1.881 during Asian hours (less than a 2bp move from Friday's latest levels) before bouncing back to 1.912 when Europe entered the fray. A choppy sideways range persisted through the first hour of domestic trading, and though 10's opened in the green, the yield lows from overnight have continued to creep higher while highs have been more of a horizontal trend near 1.91. All of the above translated to MBS opening up a few ticks higher, moving into the red a tick, and now back unchanged at 104-06.

The first takeaway from the activity so far is that the market is delivering on our suspicion that tradeflows will be the focus in the absence of meaningful data and other scheduled movers (discussed in more detail here). The second conclusion is that those tradeflows have yet to suggest that the market is eager to buy the sell-off back to stronger levels, but neither is it eager to snowball to weaker levels. Somewhat ironically, before initiating their own larger directional tradeflows, traders are waiting for other traders to initiate their larger directional tradeflows. That seems like a tense situation, no?

Things could still go either way this morning. Stocks are currently opening up a few points weaker and futures were already falling into the cash open as well. There's perhaps been a slightly detectable correlation in bond markets (in that yields ticked microscopically lower on the weak stock open), but the morning has been more readily characterized by a disconnection of the stock lever. This is probably due to horse-trading on ECB rate-cut expectations, where a think tank report is circulating suggesting "no cut"--something that stocks wouldn't much like but that also doesn't apply any downward pressure to Treasury yields.

To be clear, at least one positive reprice has already come across, and the possibility lingers as MBS continue to trade a narrow range at their highs of the day. All that having been said, those highs aren't even an eighth of a point higher than the levels that prevailed during most lenders' rate sheet print times. That means we're limited to a small subset of lenders who tend to offer "stability reprices."

Although those types of reprices aren't necessarily the kind of thing we'd hold our breath for, neither is the market selling off or even displaying any tendency toward weakness at the moment. That said, it's not displaying a tendency toward much at all! Prices have moved maybe 1 tick in either direction since before noon--10yr Treasuries, less than .5bps in either direction over the same time.

Meanwhile, stocks are falling, but haven't dipped below Thursday's levels. That's something that 10yr yields are only dreaming of at the moment. Bottom line, there's a sense that markets are holding their collective breath, waiting for the other shoe to drop.

Conclusions:
On the positive side, at least we're in the green. On the negative side, MBS have stopped making gains (which was laid out as a possible 2-day trend after fresh 2-day highs this morning) and instead have been bumping their head into a 104-09 ceiling in Fannie 3.0s. Same story with 10yr yields, but "floor" instead of "ceiling." 10's version of resistance is roughly 1.89.

After last week's major selling spree for bond markets, Asian and European trading sessions offered few reasons to be hopeful or pessimistic about the day ahead. 10yr yields moved down as low as 1.881 during Asian hours (less than a 2bp move from Friday's latest levels) before bouncing back to 1.912 when Europe entered the fray. A choppy sideways range persisted through the first hour of domestic trading, and though 10's opened in the green, the yield lows from overnight have continued to creep higher while highs have been more of a horizontal trend near 1.91. All of the above translated to MBS opening up a few ticks higher, moving into the red a tick, and now back unchanged at 104-06.

The first takeaway from the activity so far is that the market is delivering on our suspicion that tradeflows will be the focus in the absence of meaningful data and other scheduled movers (discussed in more detail here). The second conclusion is that those tradeflows have yet to suggest that the market is eager to buy the sell-off back to stronger levels, but neither is it eager to snowball to weaker levels. Somewhat ironically, before initiating their own larger directional tradeflows, traders are waiting for other traders to initiate their larger directional tradeflows. That seems like a tense situation, no?

Things could still go either way this morning. Stocks are currently opening up a few points weaker and futures were already falling into the cash open as well. There's perhaps been a slightly detectable correlation in bond markets (in that yields ticked microscopically lower on the weak stock open), but the morning has been more readily characterized by a disconnection of the stock lever. This is probably due to horse-trading on ECB rate-cut expectations, where a think tank report is circulating suggesting "no cut"--something that stocks wouldn't much like but that also doesn't apply any downward pressure to Treasury yields.