MBS Prices Hit New Intraday Lows. Reprices Reported But Not Widespread

The S&P is just off its session highs at 1085. The stock rally is being led by yesterday's biggest decliners: ENERGY & MATERIALS. (Surprise! haha not!) Financials are also at the front of the pack.

The on again, off again, on again appetite for risk has led the benchmark 10 yr TSY note yield 4.8bps higher all the way up to the 3.31% pivot. Consequently rate sheet influential MBS prices are ticking toward the outer limits of the recent range. The FNCL 4.5 is now -0-02 at 102-03. The secondary market current coupon is 2.4bps higher at 4.16%. MBS trading volume is running at about $230bn vs. the $263bn we saw yesterday afternoon. The market is definitely slow today.  Yield spreads are however at their tightest levels of the day mostly thanks to slow flows and the supportive supply and demand technicals. Modest originator supply has been offered in the form of 5.0s (yay 104-28 price!)....this makes sense as servicers are "all set" on their duration needs which allows bankers to buy up the g-fee and sell their loans and servicing direct and get some cash back!

The longer stocks hold at the session highs, the more likely MBS prices are to fall. One major already recalled rate sheets. Longer term lock periods will be the first targets of reprices for the worse.

Will stocks maintain momentum into the close or will profit takers take profits?

I say we're still range bound so i'll take action on the latter...