Equities Weakness Helping Bounce Back Potential
Quick update on the post-auction trading... After the initial knee-jerk to the lows of the day, MBS bounced back to pre-auction levels and did a fair job of holding those for about half an hour. Both Treasuries and MBS broke support at 1:40 and ticked just slightly lower in price to the weakest levels of the day.
Even now, we've seen another mini-bounce keeping hope alive that 102-19 will prove to be a temporary low with 102-20 holding as the predominant Fannie 3.0 support for the day. 10yr yields topped out at 2.033 and are currently down to 2.0205.
Bottom line, reprice risk remains in sort of equivocal territory and we remain hopeful that post-auction weakness (minus the 1 tick to 102-19) holds its ground at 102-20.
Regarding reprice potential, many lenders priced conservatively and the outright change in prices vs rate sheet time doesn't justify an adjustment to those prices. The only risk is the negativity in the trend since 11:30 and the current indecision at/near the lows. To whatever extent this second bounce back attempt has legs, the more we can pull away from reprice risk.
Those possibilities look dependent on stocks for now. Equities markets are currently down a few points (S&P) after hitting overhead pivot resistance in line with the morning lows. This seems to be helping bond markets dig their heels in a bit.