MBS MID-DAY: Holding Gains

So much for a 2.5 tick trading range. It's now up to a "whopping" 3.5 ticks and MBS have fallen to their lowest levels in about two hours with 4.0's at 100-20+. And while this isn't really a "whopping" move, it's possibly a warning that the day is not actually over, and even though we're seeing limited drive to improve upon today's best levels, we're not seeing something supportive that might similarly prevent prices from dropping off. So, it's not time to tune out for the weekend just yet. If 10's hit 3, stocks keep rising, MBS dip below 100-19, we might see a few reprices today. Goes both ways though... Just depends on the tone and frequency of the headlines. So far, they've been mildly bond-market unfriendly.

We're tagging this update as an alert so it gets out to any mobile users by way of a morning update. So far this morning, things have remained very stable in terms of MBS price movements. The biggest move in one direction or the other has been 2.5 ticks (5/64ths of a point). And currently that has resulted in a Fannie 4.0 coupon that has bumped into 100-24 on a couple occasions, and generally stayed within a close range of that mark. 10yr notes seem to be experiencing similar resistance at 2.965ish. So those would be the first two levels to watch to see if anything else might happen today. But in terms of the 10yr note, yields could trickle down all the way to 2.95 without it being too significant. Even then, that significance would be predicated on volume--something of which we've seen expectedly little. Without econ data on the calendar, we're more or less relegated to keeping an eye on those technicals and waiting for whatever deficit headlines may come. If we had to make an early wager, we'd lean in favor of saying the day looks like it's pretty much over--"over" in the sense that we wouldn't expect any significant shifts unless motivated by an unexpected headline.

Perhaps it was a bit of a natural bounce back from yesterday's Euro-zone euphoria, but some small amount of the flight-to-safety mentality came back into the picture, giving bonds a much-needed boost after a volatile Asian session did little to coax 10yr yields below 3%. They're now at 2.982 in light volume compared to yesterday. Although MBS generally don't tend to keep pace with Treasuries into a rally, they're doing a pretty good job of it so far today (maybe because it's not much of a rally yet... more of a "relief rally" after yesterday's rout). Fannie 4.0 MBS are up 8 ticks (8/32nds or .250) at 100-21. This morning's strength breaks out of the short term trend lower in price that we've seen over the past two days, BUT is still within the scope of the longer terms downtrend seen over the past few weeks. We'd need several more ticks up in order to test that downtrend. It competes with something around 100-09 / 100-10 on the low side, which we hope won't be tested today. So far at least, that looks a lot less likely. Rate sheets should be better.