MBS Pricing Snapshot

Bond markets have weakened steadily since 8:20 (coincidentally the CME/Treasury Futures open) and are now at their weakest levels of the day even as the Fed begins it's scheduled 30yr bond buying. 10yr yields haven't broken above overnight lows of 2.875, but they are challenging domestic session highs at 2.867. Fannie 4.0s are down 10 ticks on the day currently at 102-10.

The silver lining to this weakness in terms of reprice risk is that MBS prices had fallen to 102-12 before lenders put out their first rate sheets of the day. This likely serves to mitigate almost any reprice risk, though it would be increasing if we move another 2-3 ticks lower from here.

Treasuries began the overnight session several bps weaker/higher than Friday's latest levels and continued higher during Asian hours. The onset of European hours offered the first chance for a correction, but it was modest, resulting only in a move from 2.87 back toward opening levels of 2.84. Since then, volume and activity picked up as 10's returned to the other side of the range before descending again into the domestic open.

The first hour of domestic trading has seen another bounce at 2.84, but yields only went as high as 2.851 before holding ground and returning back into 2.84's. MBS began the day in roughly the same territory as Friday afternoon and Fannie 4.0s are currently down 4 ticks at 102-16.

There are no significant schedule economic reports today and we're essentially just waiting for any new trading sentiment to manifest itself. For now, the tone is defensive with Treasuries obviously having second thoughts about breaking overnight low yields at 2.84, but look even less eager to return to overnight highs at the moment. MBS are in a similar boat with prices stuck between Friday's afternoon lows and highs.