Posted
The rapidly improved prices of "rate sheet influential " MBS coupons have brought out profit takers and a bit of supply from originators looking to lock in whatever pipeline profits they could...consequently yield spreads have widened up a few ticks (since 1pm) and bids have fallen back in line with the day over day trend channel.
Lenders were quick to pass through MBS gains today...so some will be quick to take away. We are not in panic mode at the moment, as the 10 yr TSY has settled in the 3.85% range and this was an expected event, however we remain defensive. As long as the 10 yr can maintain stability, we would expect this dip in MBS prices to moderate and for bids to stabilize. We will alert if market conditions deteriorate and reprices for the worse become more likely....
(update added 2:45pm)
One more graph to show you where the profit taking stopped. The 99-26 level in fact suggests a nice ledge as it marked the last few lows just before and
after the auction. Seems like a good candidate to hold through
close... Why not!
Added another trend line to this one as well (dotted) that shows a majority of tdoay's momentum factoring out the spikes.
Unlikely that we'll be able to stay there through the end of the day unless volume stays uncharacteristically healthy. Reprices will be all over the board depending on how fast lenders are to act. Bottom line here is that we are very much in line with today's positive trend, and that in addition to catching a reasonably high floor, is a good thing.
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