Gone Sideways....

After a brief round of selling the stack has traded back up to mid morning down in coupon levels and has since gone sideways. Currently the MBS market is VERY volatile. As explained this morning we expect to see some originator selling/profit taking in the near future, investors will be less willing to pass through gains in this environment and more apt to price in a cushion on rate sheets. Some reprices for the worse have been seen, more protective reprices may follow even though trading as calmed down a bit.

That said spreads are still relatively tighter and MBS is still a better investment than Treasuries. So longer term floaters take solace in that....

Check out the retraces and bounces on the top chart. Consolidation back to 38% retrace (provided support), then bounce up to 23% which is now resistance. We are hoping to see these coupons continue to tick up a bit but would not be surprised to see a little more selling in the next 30 minutes. Bottom chart is 4.5 and 5.0....