Acting Comptroller of the Currency John Walsh today spoke to attendees of the annual American Securitization Forum conference about the role of securitization in the economy and efforts to better understand and manage the risks associated with derivatives.

The earlier round of selling leading up to and away from the Fed's twist buying took production MBS to the edge of 101-19, which is both a long and short term pivot point. Since then, they've mostly drifted sideways and slightly higher, easing some earlier reprice risk. But keep in mind that the range remains narrow and we're not very far from levels that would reintroduce reprice risk. MBS and Treasuries are both sort of drifting aimlessly sideways, in what seems like perpetual "wait-and-see" mode ahead of tomorrow's FOMC announcement, forecasts, 5yr auction, and perhaps even tonight's State of The Union (it's somewhat conceivable that a government initiative could be announced that would have an effect on MBS. That's a stretch though).

Fannie 3.5's are back to their 101-19+ pivot. Anything below that is more likely reprice territory, but even with the existing amount of weakness, MBS have fallen almost 8 ticks in 2 hours. Benchmarks are looking like they might be willing to drift slightly higher. Risks are simply increasing, even if we're not yet at levels where we'd expect most lenders to reprice.

Same old drill... Some of the "early crowd" might reprice at current levels, but a majority of lenders would not reprice unless we're falling definitively below the pivot point (101-19+ to 101-20). So depending on the lender in question, we'd keep on eye on those levels, and possibly set an automatic alert for 101-18. We may well avoid most reprices if MBS are able to continue holding sideways support.