MBS Off Highs as Treasuries Test Weakest Levels
After spending better than an hour in positive territory, MBS just slunk back into the red for a few minutes, but have already returned to unchanged levels. The day is effectively over as far as scheduled market movers are concerned, and nothing put on a very good show.
Most recently Existing Home Sales came in just a bit under forecast levels and had no pronounced effect on bond markets. 10yr yields rose gradually to their weakest levels of the domestic session but bounced there. MBS appreciated that and bounced up from negative territory moments later.
The levels where Fannie 3.5s bounced (101-16) can be viewed as a line in the sand for early reprice risk. For instance, if we were to break to 101-15 or below, negative reprice risk would be increasing for a few lenders. The jury looks to be out on the next move, but prices are close enough to justify staying tuned.