Lenders Reprice for Better as FTQ Leads Benchmark Yields Lower

Production MBS coupons are trading near session highs and lenders are repricing for the better.

The September FNCL 4.0 is 12 ticks in the green at 101-13 and the September FNCL 4.5 is +0-08 at  103-19. The secondary market current coupon is 5.3bps lower at 3.764%.  Current coupon yield spreads are off their widest levels of the day. Here are my marks: +78.5bps/10yr TSY note and +76.5bp above the 10yr interest rate swap.

LOAN PRICING IS NOW BASED OFF OF THE SEPTEMBER COUPON!

The 3.50% coupon bearing 10yr Treasury note is +0-19 at 104-12 yielding 2.981% (-6.9bps DoD).  FTQ volume rose into the rally which helped 10s break through 3.00% resistance with little fanfare. Since then buyers have backed away from the GO button and profit taking flows have been noted. 2.98% is a long term resistance level first observed HERE.  A push through 2.98 would likely lead to choppy trading between 2.92% and 2.98%.

S&P futures hit a low of 1076.25 after morning econ data reminded the markets that the Fed sees a 5 to 6 year recovery ahead. S&Ps have since bounced from the sessions lows on the wings of short covering. The move back toward 1086 as been in low volume and declining open interest.  If S&Ps bounce off of 1086 we could see stocks retest 1076.25 before investors unplug this afternoon. 

Who do you see buying the primary market?