MBS LUNCH: Recovering Price Losses After Rebound from Lows

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"Rate sheet influential" MBS prices have recovered from intraday lows, but not before several prominent lenders repriced for the worse. Since then current coupon MBS prices have bounced back to the initial post-NFP low price print.

The FN 4.0 is currently -0-14 at 98-06 yielding 4.175% and the FN 4.5 is -0-08 at 101-04 yielding 4.376%. The secondary market current coupon is 4.306%. The current coupon yield is 61.7 basis points over the 10 year Treasury note yield and 57.7 bps over the 10yr swap rate. MBS yield spreads are 5 bps tighter vs. benchmarks today.

In the chart above I called attention to the price levels at which most lenders published rate sheets this AM. I also pointed out where several prominent lenders repriced for the worse. Given the 6 tick turn around from 100-28 to 101-04, one might expect to get those lost bps back...however, it is a Friday and trading flows are dead---most lenders are not likely to republish rate sheets for a third time today. That is of course if there isn't a larger turnaround in sentiment before the session ends.....which I do not anticipate. Yes I know the price leader is all about repricing for the better when this happens..if you are lucky enough to have a loan file in process at that specific investor, MG says you got .125 back. I do not watch them because they are a big old tease. 

RE: possibility of more reprices for the worse

10s are holding stable just below today's yield highs and "rate sheet influential" MBS coupons are greatly outperforming their benchmark big brothers. If MBS traders decide they want to take profits on the basis (tighter yield spreads) before heading out the door for the weekend, we would see the above rebound rally disappear. The chances of this are not high because the MBS market is thinly traded and quite illiquid (nervous market). Still....we do not rule out the possibility of more lenders repricing for the worse by day's end if basis profit taking occurs. Either way, if profits are not taken on MBS yield spread tightening today...they will be booked on Monday.