We're not ready to pass sole possession of the production coupon title belt onto the 5.0 30yr MBS coupon just yet but lock desks are decidedly more split on their pipeline hedging strategies after the 7-week trading range broke down last Friday.
Current indications do indeed warrant the shift and we're already seeing secondary managers make the move toward 5.00% coupons, but these MBS coupon price declines must be confirmed before 5.00% 30s are given primary ownership of the production coupon crown.
In the meantime there will be a transition period as old 4.50 commitments are filled. This means 5.00 and 5.125% note rates will likley pay enough rebate to allow for no origination/discount fee quotes, but those offers are very very very sensitive to rising benchmark rates and further declines in 4.50 30 year coupons.
Which we are experiencing as the week gets underway...
Plain and Simple: If FNCL 4.5s move much deeper into the 100 handle from current indications, 5.25% will become the new "Best Execution" C30 quote and 5.375% won't be far behind. Heading into $72 billion in 3s/10s/30s this week, benchmark 10s are priced at 3.68% and FNCL 4.5s are bid at 100-25.
BEWARE short-term opportunists. Loan pricing is extra sensitive right now.