Today's trading levels couldn't have been more boring after the relative excitement of waking up to slight improvements in MBS.  But the most frequently recurring high in MBS prices this morning turned out to be the ceiling of resistance several more times throughout the day ( 102-27 in terms of Fannie 3.5's), doing little to suggest that lenders reprice ahead of tomorrow morning's all-important jobs report.  "All important" has a caveat as well, in that it's all-important to getting through this week.  The recent trading momentum makes it look increasingly like a serious negative range breakout attempt (2.29+ in 10yr yields) will be a lot to ask of tomorrow's 4 hour trading session. A big beat could do it, maybe...  But it would have to be substantially higher than the 201k forecast and the 227k previous reading.  Anything that doesn't push 10's over 2.29% is one of those "what doesn't kill MBS makes them stronger" sort of things. 

MBS Pricing Snapshot

Wow, it's really dead out there. Nary an interesting newswire or bothersome price fluctuation. Treasuries and MBS still inside the ranges we previously referred to as "holding pattern" material.

Looks like Fannie 3.5 MBS met their match so far today at 102-27, but wouldn't rule out an afternoon break higher given the low volume situation. 10yr yields have meandered aimlessly in the 2.17's. The whole picture looks a lot like the early stages of "reprice potential" on most other days. But with NFP in the morning, reprices aren't a high probability event at these levels, though we wouldn't be shocked to see one or two.

That's about it, really... Our first thought this morning was that today was pointless. We questioned its existence and still do. Life begins at 8:30am tomorrow. We don't know what kind of life it will be yet and there's always some chance that it too, could be boring, but at least it has the POTENTIAL to inspire some faster-paced movement. Today didn't seem like it had such potential, and so far, has lived up perfectly to that assessment.

We're hesitant to say "that's it" for the day, but the earlier bounces against a 2.21 ceiling in 10yr yields were very regular and saw very respectable volume. On a day where we know markets are mostly "waiting for tomorrow," and considering that volume has been steadily declining since those tests, we're tempted to consider that ceiling some sort of near term boundary through 3pm.

MBS have translated that support into a pivot-point bounce off the popular 102-19, also y'day's highs (Fannie 3.5's). Whether or not 10's are interested in going lower than 2.18 or Fannie 3.5's higher than 102-27, we don't particularly mind. The upside would be slightly increased chances of positive reprices today, but the downside would be missing the opportunity to come into tomorrow as an 'underdog' of sorts.

For now, 10's are hesitating to break their most discernible pivot point of the morning at 2.18. Although Fannie 3.5's did trade over 102-26 briefly, it seems that level is a reasonable translation of the TSY pivot at 2.18. Both are bouncing slightly to the weaker side.

Bottom line: 2.21-2.18 in 10yr yields = incredibly boring. 2.18-2.16, slightly less boring, but still not much implication on the range. So anything between 2.21-2.16 would constitute a holding pattern for bond markets into tomorrow. Fannie 3.5's breaking over 102-27 increases positive reprice potential. Negative reprice potential increases if Fannie 3.5's approach 102-19.