So I am sitting at my desk, watching trade flows, laughing...
Not just a chuckle, straight up laughing out loud by myself...more like a crazy HAHA than a funny HAHA though. WHY?
The Predictability of the Range.
Rates rallied out the gate this morning. However, later in the day stocks began to recover losses and benchmark TSY and "rate sheet influential" MBS coupon prices plummeted. In most cases when MBS prices fall precipitously we issue an ALERT (6 tick drop warrants REPRICE ALERT). We didnt do that today though...instead we advised to resist the urge to PANIC.
Im not going to lie, I get nervous every time we say "dont panic". We feel like many readers are basing their lock/float decisions off what we say, and we really dont want anyone losing income because we made a bonehead call about the direction of rates. We take DONT PANIC instructions very seriously.
I just couldnt resist today though...given our summer long experiences with the habits of a day trader, RANGE TRADING seemed obvious as the day progressed. (READ MORE ABOUT WHY IN MBS OPEN). Indeed this has been the case, we've gone from new highs to new lows to new highs. Check out the visual...
The FN 4.0 is +0-15 at 98-29 yielding 4.1151% and the FN 4.5 is +0-12 at 101-10 yielding 4.3405%. The secondary market current coupon is 4.2115%.
The FN 4.5 is holding near the topside of the range...early lunch losses have been recovered.
Paving the way for "rate sheet influential" MBS coupons is the yield curve!!! The 10yr BOUNCED all the way back down to 3.30% after buyers returned at 3.34%. This is very simple. Buy Low Sell High. On a daily basis.
WHAT DO YOU THINK HAPPENS TO RATES HEADING INTO THE CLOSE???? BOUNCE AT 3.30%??? IF SO DOES 3.34% MODERATE LOSSES???
SIGN OF THE APOCALYPSE: MEREDITH WHITNEY DOWNGRADES GOLDMAN SACHS
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