MBS Turn Around in Afternoon Session. Reprices Reported

Rate sheet influential MBS coupons totally reversed course this afternoon after getting whacked as the week began....

The November FNCL 4.0 went out +8/32 at 102-06. The November FNCL 4.5 went out +9/32 at 103-30. New loan supply totaled less than $2 billion with most of it being offered in the form of 4.0 30 year paper. I've got the secondary market current coupon marked at 3.668%. Yield spreads ended the session UNCH vs. TSYs and swaps after moving notably wider this AM.

There were positive signs embedded in the afternoon recovery, unfortunately those signals were short term in nature and not indicative of a broad based shift in sentiment. Basically what we witnessed was position squaring ahead of the FOMC decision tomorrow.  This includes short covering from fast money traders and lock desks buying back hedges. No one wants to get too far in front of that event without leaving themselves an easy out.

From a technical perspective, the next move in MBS prices looks to be lower, at least if the downtrend continues...

From what I see, after reprices for the better,  loan pricing is close to UNCH to slightly better vs. rebate offers on Friday. Short termers, this is an opportunity to take what you've got and run. I am still playing the range but I cannot stress this enough: RISKS REMAIN HIGH THAT RATES WILL RISE HEADING INTO MONTH END! 

My target is still 2.85% on the 10-year TSY note....