"Rate sheet influential" MBS coupons are holding their range...right along with the US10YR note. The 10 yr note has bounced back and forth between 3.63% and 3.67% all morning...traders have tested the 3.67% support level three times already...and have failed to break through (yay)....all while stocks test their intraday highs. The FN 4.5 has stayed between 99-22 and 99-16 most of the day...with MBS price weakness picking up as the 10 yr tries to break through 3.67% support....that said, we remain nervously optimistic about avoiding a reprice for the worse. See more below re: "nervous optimism".

To further illustrate the previously stated guidance "MBS will be at the mercy of the gyrations of the yield curve"....here is another MBS price action chart compared to yield spreads. Notice when relative value is percieved to be "Neutral"..price action goes sideways. When relative value is percieved to be "Rich"...MBS prices move lower. When relative value is percieved to be "Cheap"...prices improve!

Plain and Simple: we continue to take directional guidance from benchmark big brother TSYs....a function of the market "waiting to see" the market's psychological reaction to tomorrows release of Non-farm payrolls. This is one of those times where we will say its ok to watch TSYs to pace the price behavior of MBS.  If you look closer at the MBS price action chart (bottom)...you will notice some unexplained sell offs....this is  because some market participants base relative value off of interest rate swap rates. Well...because of the rapid rise in interest rates over the past 30 days...swap rates have been subject to supply/demand technical and a massive amount of hedging.Another explanation is the obvious...someone was dumping supply...

I am hesitant to say that we are on REPRICE WATCH because lenders are mostly in a holding pattern...but just to be safe if you are floating short term keep your finger close to the "submit lock" button....

Just for fun...I am going to stick by my previous statement that the 3.67% support level (3.70%= psychological support) will help us avoid a "reprice for the worse" (thank you short covering).  Anyone else want to make some bets as to what stocks and bonds do as we near the close?

MBS QUOTES