MBS trading is slow moving this morning as participants are generally focused on the settlement process and the inescapable inclination to honor the lives lost of 9/11/2001.
In what activity we have seen, the Fed has easily absorbed almost $1 billion in originator rate locks (MBS selling), real money accounts, who were selling yesterday, are buying down in coupon today, and day traders continue to meddle UP IN COUPON. 6.0s look to be the favored coupon of fast money market players today.
Slow flows or not, a rally on the yield curve has led "rate sheet influential" MBS prices higher....
Here is where the ALERT part comes in...
After failing to break 101-00 three times, the FN 4.5 was finally able to push through resistance...but it was only for a short time. Currently the FN 4.5 is trading +0-05 at 100-29 yielding 4.39% using a 5 CPR (yeh...I know thats slow speed. '09 vintage hasnt printed faster than 4.3 CPR...5 is fair).
This fall doesnt warrant a reprice for the worse...but odd things have been known to occur on Friday afternoons, especially during settlement. Adding to that outlook is expected profit taking in benchmarks, which would lead "rate sheet influential" prices lower (see more below).
The yield curve is leading the charge for spread products. The Dec 10 yr TSY contract broke 118-04 and testing 118-14....BUT FAILED. Currently the TY is trading at 118-09.
The 118-14 price point corresponds to 3.28% in cash market 10yr TSY yields. Many traders targeted this range as a consolidation point. Meaning profit taking is expected near 3.28.
If/when this occurs, a stabilization should follow as the market finds an acceptable price level (look for high volume). If this plays out as expected...the FN 4.5 will push to/over 101-00 again...erasing any alerts. It's really about acceptance of a range...once traders find the right levels, chopatility will calm.
In stocks....Check out how VWAP (volume weighted average price) has served as a strong pivot point for equity traders...BANG BANG BANG
High volume marks are at 1036 and 1039...1036 will serve as strong support for the S&P.
The dollar is STILL falling...but t a slower pace
Oil prices plummeted from 72.90 to 69.62 on demand worries
Gold is up on the day...but off earlier highs. Still over $1,000 though
AND...
Rate sheet rebates are better
ALERT OUTLOOK: Although we expect the rates market to stabilize...if you have been "letting it ride" and are closing in the near term...extra precaution should be taken right meow, keep your finger close to the "SUBMIT LOCK" button.
MBS Market Alerts
