Off the Highs, but Narrow Range Limits Reprice Risk
Visually, it's almost worth noting that MBS have moved off their highs. In fact, Fannie 3.5s are now in line with the predominant lows from earlier this morning at 102-03.
But with today's highs at 102-06, that's only 3/32nds of weakness. Even then, the highs of the day came well after most lenders were out with rate sheets, so we've only seen 1-2 ticks of weakness that matters (and even "no weakness" for lenders that priced earlier in the day). This might be a different story if we had any positive reprices with the late morning gains.
Market activity remains dreadfully subdued with Treasuries and MBS moving in measured, moderate steps. The only reason we're sending out this update is that those "measured steps" have been exclusively weaker since noon.
This coincides with a bounce in equities markets as well as the close of European markets. That stands to reason considering we gave Europe some credit in helping US bond market trading levels earlier in the day. Bottom line: risks of negative reprices could increase if this trend continues.