Production MBS coupons are outperforming "up in
coupon" MBS this morning. In terms of MBS's relative value, 4.0s and 4.5s yield
spreads are tighter vs. benchmark TSYs (MBS outperforms TSYs). The stock lever
and its effect on TSY yields continues to control intraday MBS price trends. As
we have drawn closer to notification day (class A is tomorrow) the MBS market has gone silent
as most market participants have already rolled their paper trading positions
ahead to May. On the supply heavy side of the stack (production coupons) the
Fed continues to easily overwhelm any originator offerings of available for bid
MBS pools. Trading
activity as slowed to a standstill. We are nonetheless still improved on the day....
change from 5pm "Going Out" marks...
FN30_______________________________
FN 4.0
-------->>>> +0-08 to 100-04
from 99-28
FN 4.5
-------->>>> +0-07 to 101-26 from 101-19
FN 5.0
-------->>>> +0-05 to 103-03
from 102-30
FN 5.5
-------->>>> +0-01 to 103-26
from 103-25
FN 6.0
-------->>>> +0-02 to 104-21
from 104-19
GN30________________________________
GN 4.0
-------->>>> +0-07 to 100-05 from 99-30
GN 4.5
-------->>>> +0-07 to 101-31
from 101-24
GN 5.0
-------->>>> +0-05 to 103-20 from 103-15
GN 5.5
-------->>>> +0-01 to 104-03
from 104-02
GN 6.0
-------->>>> +0-02 to 104-23
from 104-21
The FN 4.5 already ran through its previously marked 101-24 overhead
resistance zone. However soon after running through that resistance the MBS
market consolidated its gains. If stock markets continue to express their
feelings that the month long rally in equities was nothing more than a
"bear market rally", production supply MBS coupons may further
benefit from any flight to safety yield curve flattening. Next level of resistance is 101-31. Aggressive
lenders will be more willing to improve rate sheets if the 4.5 can demonstrate
some stability over the 101-24 resistance zone.
The Dow is down 1.73%. The S&P is down 1.54%. The NASDAQ
is down 1.86%.
Anyone want to take a stab at why the beginning of the month is generally a supportive time for MBS?