Lack Of Volatility Prompts Reprices For The Better

Since 10:30am, FNCL 4.5's haven't moved more than 2 ticks and continue to operate at or near their highs of the day. 

10yr yields have been similarly stable and continue to grind lower around what would be heavy resistance around 3.61.  But in order to consider 10yr yields to be truly doing any sort of battle with resistance, there would have to be some volume in the marketplace, and sadly, there is not. 

Well, almost... 

It's worth mentioning on the 10yr chart below that the one spot in the last few hours with noticeably higher volume arrives to reject a break below 3.61, as if to say: don't get too excited...

Today's movements fall within the context of a larger trend that has been favorable for bonds.  But with yields now approaching the lower red line in the chart below, it may suggest profit taking for some longs that might have been taken out in the 3.70 territory.  And in general, reaching one side of a trend channel is usually a signal to move in the opposite direction until such time that the channel breaks.

MBS have been in a channel of their own, and you can note the narrowness of the range today near the highs.  The next move is lower or sideways if the trend channel holds. 

I commented on this "narrow and positive" range in MBS earlier today on the MBSonMND dashboard, as I discussed the day's movement with members who had been noting reprices for the better even from lenders they normally wouldn't expect to reprice for being only 9 ticks up on the day.  My response:

Well, I can tell you that MBS and lenders making rate sheets draw a lot of their "mood" from volatility. Since there is relatively little of that today, it's helpful for conservative lenders to feel better about repricing for the better even if the outright 9 tick gain is something that otherwise wouldn't motivate the reprice.

One of our members then commented that he had just locked a deal and according to Murphy's Law, we'd probably see reprices for the better and thus owe him the thanks.  My response to him is a pertinent thesis to my general thoughts on short term strategy tonight:

This afternoon feel like a very intelligent time to lock as far as I'm concerned. Not because it's a sure-fire winner, but because it's the best and longest positive momentum we've seen all month, and is either testing the more bullish limits of a diagonal range, or breaking out out of a horizontal range on low volume. Either way, with risky data ahead, and at the best levels in over a week, I'd definitely be locking some today.

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