Things could have gone either way into this month-end/quarter-end trading day, either running out of steam at recent highs (or lows in TSY yields) or extending recent gains just a bit more to reach a potential range boundary around 2.10% in 10yr yields.  We ended up getting the "running out of steam" option, and what had been an exceedingly calm session at improved prices quickly got ugly.  A few big sellers flushed out a small flood of hold-outs who'd been waiting to hit that magical 2.10% or at least 2.13% range boundary.  Those first two over-sized snowflakes were all that was needed to convince the hold-outs that bond markets were indeed out of steam for the month.  And the snowball was rolling...  MBS swung 3/8ths of a point to the downside, prompting widespread reprices for the worse.

Open MBS Live Dashboard
FNMA 3.5
102-25 : -0-05
FNMA 4.0
104-28 : -0-04
FNMA 4.5
106-12 : -0-04
FNMA 5.0
108-02 : -0-03
GNMA 3.5
104-09 : -0-05
GNMA 4.0
107-11 : -0-03
GNMA 4.5
108-27 : -0-02
GNMA 5.0
110-15 : -0-02
102-17 : -0-05
104-18 : -0-05
106-02 : -0-03
107-23 : -0-02
Pricing as of 4:08 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBS Live Dashboard.

Make sure you're signed up for Reprice Alerts to be notified by email or text the instant these are issued.  You can manage all MBS Live email and text notifications thru the 'My Alerts' menu option at the bottom of the dashboard or by clicking here.
2:21PM  :  NY Fed Releases Next Month's Buying Schedule
"Across all operations in the schedule listed below, the Desk plans to purchase approximately $44 billion and sell approximately $43 billion in Treasury securities over the month of April."

There were some slight changes in the size of the buybacks... 2036-2042 range down from $1.75-2.25 bln to $1.50-2.00 bln. 2020-2022 Buybacks down from $4.50-5.25 bln to $4.25-5.00 bln.

Slightly negative for bond markets here as it decreases the level of guaranteed commitment to the long end, although mitigated by the fact that the overall scheduled buying amount remained unchanged. (In other words, the change is that the Fed is only promising $1.50 bln and $4.25 bln in those two operations whereas before they were in for a quarter of a billion dollars more.
2:09PM  :  ALERT: You Will See Reprices For The Worse if You Have Not Already
Yet another alert to emphasize the seriousness of the situation. The whole point of the "Tasuki Gap" conversation in this morning's "Day Ahead" post was to introduce the possibility that markets had identified the near term range boundary around 2.14 in 10yr yields after not being able to make it back to the site of the initial gap from March 13th in the mid 2.13's.

It's now possible that we're seeing exactly that. What began as a minor pop driven by some ECB headlines and a few large blocks of sales in TSY Futures quickly took on "snowball" characteristics resulting in the largest 10 minutes of volume of the entire week.

The battle in question is occurring in Treasuries at the moment. MBS are merely keeping pace, and outperforming as the normally do into TSY sell-offs. We're looking for 10yr notes to find support between 2.2068 and 2.2120. If they do this, the bleeding should stop for the day, but it could be too little, too late to escape the sending of the message that the near term range boundary is in. In this case, we'd be looking at an equivocal range trade slightly higher in yield ahead of next week's employment data.

Fannie 3.5's are currently down 6 ticks on the day at 102-24 and 10yr yields are up over 4 bps to 2.2016, having briefly tested the previously mentioned 2.2120 level. Too soon to confirm it as a bounce, but we're hoping.... If you haven't seen a reprice for the worse yet, they're coming. (the tasuki gap post mentioned about is linked here:)
1:43PM  :  ALERT: Negative Reprice Risk Increases as MBS Hit New Lows
This is more of an addendum to the previous alert to let you know that MBS have indeed broken below 102-29 and despite the "Friday afternoon" light volume in bond markets, price is price, and current prices justify increased risks of negative reprices.

Fannie 3.5's are down 4 ticks on the day now at 102-26. 10's are up 1.8 bps on the day at 2.177.
1:01PM  :  ALERT: Don't Tune Out Just Yet.... Friday Afternoon Volatility
This isn't necessarily a negative reprice alert, but for our audience members in the field, we wanted to let you know about a quick 4/32nds drop in MBS. 102-02's have quickly become 102-30's and the main culprit looks to be low volume and potentially EU-headlines related to Spain. But like so many snowballs, what starts with low volume can soon grow to problematic sizes.

Bottom line, exercise caution. 10yr yields are up a quick 2bps from their very best to very worst levels of the day in a matter of minutes. It looks like support is at least going to TRY to hold at these levels, which would go a long way toward mitigating any potential shifts in reprice risk, but if Fannie 3.5's dip below 102-29, negative reprice risk would be picking up again.
12:28PM  :  ALERT: Slow and Steady Winning the Race for MBS. Friday Reprices?
On the one hand, MBS are at their best levels of the day and have been trading in "tortoise-like" fashion, slowly and steadily making their way higher. The move is analogized by 10yr benchmarks which are also at their best levels of the day. But there are caveats....

a) Low volume
b) day's range is still fairly narrow
c) Fannie 3.5's up 4/32nds to 103-01
d) 10's still above important 2.13 pivot

Long story short, yes, such price action is historically indicative of the early reprice crowd inching their fingers toward to reprice button, but the extent to which that phenomenon plays out is mitigated by the day of the week, hour of the day (afternoon on a Friday = dead), and the general levels.

Whether or not we see positive reprices doesn't much matter next to the fact that we're not likely to see negative reprices (at least not for market-based reasons). To that end, we're floaters until cut-off, unless things turn around markedly before then. Extremely quiet and boring out there this afternoon... We hope it stays that way.
Featured Market Discussion
A recap of the featured comments from the Live Chat on the MBS Live Dashboard.
Matt Hodges  :  "REPRICE: 4:03 PM - Suntrust Worse"
Steve Chizmadia  :  "REPRICE: 3:05 PM - Pinnacle Worse"
Ira Selwin  :  "REPRICE: 2:36 PM - Franklin American Worse"
Matthew Graham  :  "I know you know this AH, but for anyone who doesn't, it can be a bit of a paradigm shift to wrap your mind around the fact that this whole sell-off is dependent on a few big trades starting a snowball... It really could just as easily have gone the other way if those trades were buys instead of sells."
Andrew Horowitz  :  "had a nice run through yesterday nothing to drive it today, profit taking maybe and technical plays "
Matthew Graham  :  "this just as easily could have gone the other way this afternoon."
Matthew Graham  :  "I started to get concerned about this yesterday when 10's looked out of gas to move much lower. I know there was a lot of that sentiment "out there," but fairly balanced with others who anticipated a more sincere test of 2.13+, 2.10 or 2.096"
Andrew Horowitz  :  "failure at 2.14 maybe MG?"
Matthew Graham  :  "The Tasuki gap thing really started out as more of a conversation piece and a bit of lark this morning, but that's exactly the point of it... Tasuki is the sash of a kimono, and the Tasuki gap pattern in candlesticks was thus named because the kimono fabric hangs over the sash, but is not supposed too completely envelope it. It could indeed turn out to be "nothing to see here," or it could evolve into a nasty long term pivot point. There's no way to know that right now."
Jason Nugent  :  "REPRICE: 2:28 PM - USBank Worse"
Jason Nugent  :  "REPRICE: 2:22 PM - Sun West Mortgage Worse"
Matthew Graham  :  "originator selling quickly ramping up over 2 bln"
Matthew Graham  :  "aforementioned "critical support" broken down.. "
Timothy Baron  :  "This is getting fugly."
Thomas Nelson  :  "REPRICE: 2:19 PM - NYCB Worse"
Charles Beasley  :  "REPRICE: 2:17 PM - Chase Worse"
Jason Nugent  :  "REPRICE: 2:17 PM - Wells Fargo Worse"
Chris Kopec  :  "Who ran over my turtle?"
Matthew Graham  :  "this is a real battle folks... biggest 10 minutes of volume of the week"
Chris Kopec  :  "It was just insane of me to think we could have an event-free Friday afternoon."
Matthew Graham  :  "2.2068 to 2.2120"
Brent Borcherding  :  "It's like you can know what they're going to do before they do it, if you pay attention."
Ira Selwin  :  "REPRICE: 2:00 PM - Franklin American Worse"
Matthew Graham  :  "2.21 is critical support in 10's "
Matthew Graham  :  "getting some reports now of a few big sellers forcing the hands of a few others, starting the snowball rolling. You could be seeing what the markets are identifying as the near term range boundary. "
Wayne Simms  :  "Consumer here -- ran my numbers through the chat ringer yesterday and just now locked my HARP refi at 4.125 -- many thanks to the collective wisdom of the board."
Matthew Graham  :  "at this point, it's technical/snowball selling. Kicked off with various EU Headlines re: spain/ECB"
Bill Laffey  :  "REPRICE: 1:48 PM - Provident Funding Worse"
Michael Tadros  :  "REPRICE: 1:46 PM - Interbank Worse"
John Rodgers  :  "I'm locking so it won't matter"
John Rodgers  :  "Hopes are fading for 103-5"
Matthew Graham  :  "interesting article for discussion: http://www.mortgagenewsdaily.com/03292012_mortgage_referrals.asp"
Daniel Kramer  :  "NYCB, but they are a nightmare to deal with, in my opinion"
Ira Selwin  :  "True Jumbos? Did you check out US bank ?"
Matt Devine  :  "anyone know who has some competitive rates for jumbo loans?"
Matthew Graham  :  "New bill introduced today in congress: "H.R. 4323: To amend the Truth in Lending Act to improve upon the definitions provided for points and fees in connection with a mortgage transaction.""