The FN 4.0 is currently +0-02 at 97-26 yielding 4.225% while the FN 4.5 is trading +0-02 at 100-17 yielding 4.438%. The secondary market current coupon is 4.385%. In the primary mortgage market, the most aggressive pricing I see has 4.75 close to par, unless you are getting raw correspondent rate sheets or mandatory/direct trading pricing...that's a totally different story. (BE hedge is still expensive. Lenders pay for reliable delivery!)
Below is a FN 4.5 two day chart. In the MBS CLOSE, MG pointed out the importance of 100-15. Anyone notice I keep pointing you back towards the MBS CLOSE :-D...
The range bound mentality of the marketplace is once again OBVIOUS. The 10yr TSY has bounced between 3.42 and 3.48 while 3.46% has served as an intraday pivot point. When the market is range trading, pivot points represent the price/yield level that the market starts to reconsider the direction it is currently heading. As you can see below 3.46 has served as a strong pivot point overnight into this morning....
To relate 10yr TSY yields to rate sheet influential MBS prices...
When the 10yr hit 3.46%, the FN 4.5 fell to a price of 100-14 which yields 4.449%. So the yield spread between the FN 4.5 and UST10YR is roughly 0.99%. If the 3.42 to 3.46 range were to hold all day and UST10YR/FN4.5 yield spread were to hold at 0.99%, the FN 4.5 would trade between 100-14 and 100-24 for the rest of the day. Unfortunately yield spreads have been getting wider so the FN 4.5 may not break 100-20 unless 3.42 is broken. The low print will likely be 100-14 , unless the 10yr breaks 3.46, which we would then likely see 100-12.
Yesterday afternoon I said the bond market was anticipating higher yields, then told you the following in the comments.
The 2s/10s curve is currently at 245bps. Bull Flattener in motion...
There is a reason I keep discussing this topic. If you read MBS CLOSE and are unsure why the shape of the yield curve matters. Please ask specific questions and we will try to help clear up any confusion.
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