MBS RECAP: Slow Session

The NY Fed just announced and extra $62 bln dollars go toward purchasing Treasuries and TIPS between June 13th and July 11th. This, in addition to the $600 bln easing already scheduled to end on June 30th. Bond markets are tanking in response, stocks are gaining back previous losses. Fannie Mae 4.0's are down from 100-30 to 100-25. Although 100-25 isn't exactly far enough from the bulk of the MBS range for the day to justify reprices for the worse, it's possible that the nature of the market moving info, combined with the rapid, unexpected, late day price movement, constitutes an increased risk of reprices for the worse.

Treasuries and MBS had been benefiting from big stock losses on the day, but as those seem to have found a floor just after 11am, so too have bond yields. The location is really nominal for a market that doesn't want to telegraph any particular convictions about next week's trade as it occurs EXACTLY on the super long term trendline seen in much of our recent analysis. But it's still a green day for bonds... The 10yr yield down just over 4 bps on the day although our beloved MBS aren't quite rallying to the same extent. Fannie Mae 4.0 coupons are up 7 ticks on the day at 100-28, almost back to the last prices seen on yesterday's June coupons (remember, today is July coupons and thus, inherently about 15 ticks lower in price. June coupons closed yesterday at 101-02. July coupons at 100-21. The day over day change of 7 ticks pertains to July coupons since June has gone bye-bye. All in all, prospects of reprices in either direction look limited for now. But if a lender were to reprice now or soon, we'd lean towards that being a reprice for the worse. The bigger concern is whether or not 10's make it through resistance next week. Historical precedent says they might, but also that a failure to do so would see a steep enough back up to ultimately effect Best-Ex mortgage rates.