MBS Pricing Snapshot

Fannie 4.0s are down 6 ticks on the day, and roughly four of those have come since the first rate sheets of the day. That puts us right on the edge of entering negative reprice risk territory for the most price-sensitive lenders, but support is holding so far. There is no data and no events behind the move other than potentially the trading of yesterday's budget headlines. 103-19 in Fannie 4.0s would be where negative reprice risk picks up.

An hour into domestic trade and MBS are only 3 ticks weaker in Fannie 4.0s at 103-23. 10yr yields are a similarly tame 2bps higher at 2.8188, very much within yesterday's trading range.

While current levels aren't necessarily indicative of the rest of the day, it would have been fair to expect more weakness by now, given the attention paid by the FOMC to fiscal policy. To be blunt, the Fed has repeatedly blamed congress, at least in part, for the Fed's own hesitance to curb asset purchases.

Although legislation isn't passed officially, that's a formality at this point. Thus, we wouldn't be surprised to see market participants upgrading possibilities of a December taper. If that's the case, we're not seeing it traded too terribly much, though the day is young.

It does look like it's factor due to the discrepancies between the overnight session and early domestic trading. Treasuries didn't follow German Bunds lower in yield overnight at all--something they typically do. Then they experienced their sharpest dose of weakness right around the time early domestic trading gets underway. Long story short, US markets are reacting more to US-specific news. No surprise there. The only surprise is that it hasn't had more of an impact yet.

There is no significant economic data on tap this morning, but 10yr Treasuries will be auctioned this afternoon with results reported at 1pm.