With MBS prices hitting new highs on a daily basis, lock desks and traders have been able to get away with being a bit  underhedged. While this strategy works out great if MBS prices are rising, the opposite occurs when prices are falling.

When secondary is operating with shorter hedge ratios, reprices for the worse will come much faster than reprices for the better. This is a risk right now.

The FNCL 4.0 MBS coupon (CL is the prefix for 30 year note btw) is currently -0-03 at 100-10. This is 10 tick off the highs of the day and 9 ticks lower than the price level where most lenders published rate sheets.

YOU MAY SEE SOME REPRICES FOR THE WORSE

The 10yr not's trend channel continues to consolidate....

Treasury announces the results of the $30 billion 7-year note auction at 1pm.