MBS Prices Recover from Friday Downtrade. Reprices for Better Possible

Led by a corrective bounce in Treasury prices, rate sheet influential MBS coupons have rallied more than 8 ticks from where they opened at the session lows. This is not reflective of concentrated demand for agency MBS, as evidenced via wider production MBS coupon yield spreads, as much as mortgages are playing follow the leader with a bull flattening benchmark yield curve. Although it is normal for MBS to lag a TSY rally, there also looks to be some localized weakness in the MBS market as dealers are attempting to distribute the $3+ billion in new loan supply that was offered by originators on Friday. 

The October delivery FNCL 4.0 is currently +0-13 at 102-24. Bid wanted...

Treasuries are retesting the Friday sell off. The September expiry 10 year TSY futures contract is +0-30 at 126-03. The December delivery contract is +0-31 at 125-10.  In the cash market, the 2.625% coupon bearing 10yr TSY note is +0-30 at 100-24 yielding 2.541% (-10.6bps). 

Retesting the sell off...

On average, loan pricing is 1.6 bps better this morning, however because several lenders actually reduced rebate, reprices for the better are possible.