MBS RECAP: 2/15/2011

There has been very little movement in bond markets since the last update, and what little there has been is generally positive with 10yr yields trending slightly lower and FNCL 4.5's mirror and matching to move slightly higher in price. Risks of reprices for the worse from earlier in the day are effectively vaporized as we are probably looking at tomorrow before seeing any significant changes in MBS.

The overall pattern of 10yr Note is convergent at the moment with a series of lower highs and higher lows. Yields are currently at 3.621 as the 3pm official close approaches. MBS haven't moved much, making reprices unlikely (though more likely to see a reprice for the better from a lender that didn't put one out already today). FNCL 4.5's are at 100-27.

10yr notes hit 3.64, but met with support before going any higher. They are now back down at 3.627. FNCL 4.5's rose from 100-24 back to 100-27. These moves allay fears that accelerating losses would lead to reprices for the worse.

Be advised: this is just the "introduction" of reprice risk, meaning we've only reached levels of moderate concern in the past 30 seconds. MBS would have to stay here or move lower to suggest more widespread reprices for the worse, however, the steepness of the losses in recent minutes may be of enough concern for some lenders to reprice for the worse sooner. 10yr notes have moved from 3.6 to 3.64 in 20 minutes. FNCL 4.5's are at 100-25.

10's are back up to 3.621 now after grinding against 3.60 for a third time just now. It's possible they'll meet some support here, but it should have been seen just slightly lower in yield, so there's also a chance we're looking at a break out of the range. FNCL 4.5's are down from 100-29 to 100-27. We have continued to see reprices for the better, but if bonds don't hold current levels, that trend may be at an end.

Rebate on the mostly widely quoted note rates improved on average by 25.4bps yesterday. C30 loan pricing is another 14.0bps better today. The largest improvements are seen between 4.875 and 5.125% note rates. Best Execution has shifted firmly to 5.125% after being split between 5.125% and 5.25% last week.

"Best Levels Of The Day" should really be "best levels in nearly two weeks" considering we haven't seen benchmark yields this low since before NFP. 10's are at 3.606 and FNCL 4.5's are at 100-27, meaning reprices for the better may continue to trickle in.

Scattered reports of reprices for the better have come in, but nothing widespread yet. After falling from recent highs at 100-28, FNCL 4.5's held support at 100-25 and if this continues to hold, more reprices may be seen. The 3.6 resistance previously mentioned in 10yr treasuries has not been retested so far, but neither have yields moved higher than 3.62.