MBS Set New 2011 Price Highs. Recalls and Delays Possible

"Rate sheet influential" MBS coupons are following Treasury prices higher as traders cover short positions before the long weekend ahead.

This bullish behavior has led benchmark 10s through strong resistance at 3.09% and carried FNCL 4.0s to new 2011 price highs (100-20).

3.07% is our next target. This level carries quantitative implications as breaking it would likely bring about snowball buying in the bond market. I smell a short-squeeze as the curve flattens and real$ shortens up hedge ratios....

FNCL 4.0s at new 2011 price highs.....still not much origination to speak of though.  We'd expect the FNCL 4.5/4 swap to test 3-00 if benchmark 10s break 3.07% with volume.

Reprices for the better are possible. The earlier your lender published rate sheets, the more likely you are to see recalls. If your lender has yet to release rate sheets, further delays are possible. On a defensive note, we remain wary of profit taking at these levels but it is encouraging to see the rally hold in high-volume even as stocks have attempted a bounce from intraday lows  (Thank you short covering!).

Drip, Drip, Drip. Queue it up S&P traders: THE LEVEE IS BEGINNING TO CRUMBLE