MBS AFTERNOON: Fed Keeps Market Balanced All Day
Heading into the 5pm marking period, the FN 4.0 is trading +0-04 at 98-09 yielding 4.178% while the FN 4.5 is +0-02 at 100-29 yielding 4.391%. The secondary market current coupon is 4.338%.
The FN 4.5 just set a new intraday high at 100-29, two ticks above the prices reported in MBS LUNCH. Reprices for the better were reported in the lunch hour, at best we saw .25bps come back to you.
Here is the FN 4.5 two day...
MBS trading volume was average with the Fed concentrating their efforts in the belly of the coupon stack (5.0s and 5.5s) while banks, insurance companies, and fast money (money managers and hedge funds) were also buyers. Didnt see much new supply on the screens, $2bn at most. Did however see a few more seasoned bids lists though....
MBS yield spreads were tighter all day long thanks to a mysterious force which always seemed to be there when spreads showed signs of leaking out....please note my sarcasm. The 'mysterious force' was the Federal Reserve making sure flows were balanced...ALL DAY.
The Fed released their weekly MBS purchases at 3pm. Net purchases totaled $18.1 million...bringing their daily purchase average down to $3.62billion per day. It is expected that the Fed will continue to slow the pace of daily purchases as the program winds down. Although the Fed is reducing their weekly purchases, it has yet to have a major effect on MBS valuations as new production TBA MBS supply has been quiet.