MBS ALERT: Prices Falling as Benchmark Yields Rise
The 10yr TSY note yield has pushed through 3.40% and is currently testing 3.42%. This down trade in TSYs has forced "rate sheet influential" MBS prices to the lows of the day.
The FN 4.0 is currently -0-14 at 100-17 yielding 4.2121% while the FN 4.5 is trading -0-15 at 100-14 yielding 4.4494%. The secondary market current coupon is 4.378%.
The FN 4.5 yield is now 103.24bps higher than the benchmark 10yr TSY yield. Cheaper dollar MBS prices should bring out a few real money bargain buyers which will help keep "rate sheet influential" yield spreads from gapping out further.
Looking ahead, we are watching and waiting for the 10 yr to bounce lower at 3.42%. If this occurs the FN 4.5 should stabilize near 100-18. If the 10yr trades through 3.42% and higher, expect to see REPRICES FOR THE WORSE