Rates Chop Around Range as Stocks Rally. Rebate Already Reduced

Just as they did yesterday, stocks are making a push higher as we head into the close.

Price action indicates this rally started as short covering and picked up a few new long positions after S&P futures crossed through 1070 resistance. It remains to be seen whether or not this rally will hold or if profit taking and short selling will send flows back into the red. I would expect S&Ps to at least retest 1070 before moving higher. If 1070 fails, stocks may go "bid wanted" which could lead  S&P futures back to 1060. If 1070 holds...1100 is not far off in the distance. Expect choppy behavior, stocks are bouncing around a wide range....

While the "flight to safety" is losing some of its luster as risk markets rallies, benchmark Treasury yields are generally contained by the range, trading in a choppy manner between 2.92% and 2.98%.  The 3.50% coupon bearing 10 year note is just off its high yield of the session, currently +0-09 at 104-26 yielding 2.932% (-3.1bps). The 2s/10s yield curve is 2bps flatter at 235bps after the 2 year note hit a new record low yield of 0.572%.

Profit taking should occur as 10s approach 2.92%....

Consequently, a modest amount of price pressure has been put on "rate sheet influential" MBS coupons, but once again...uncertainty is abundant and the range is containing directionality as investors "buy the dips and sell the rips". The September FNCL 4.0 is +0-05 at 101-10. The FNCL 4.5 is +0-03 at 103-15. The secondary market current coupon is 2.0bps lower at 3.772%. Yield spreads are wider but off the wides of the day.

Loan pricing is 9.9 bps WORSE (on average) and buydowns are essentially UNCH.  This makes reprices for the worse unlikely...

Borrower BestEx is 4.50%