MBS RECAP: 9/26/2011

It's always slightly bittersweet to make note of Housing-Related economic data because it's exceedingly relevant to our industry, but lately has been anything but relevant to MBS movements, let alone Treasuries and Stocks. So it was with New Home Sales today... Expected to be lackluster, and they were.

Tomorrow's Case-Shiller price index is similar: Probably not a market mover, and expected to be lackluster. That hits at 9am. Consumer Confidence at 10am has much more potential to shake things up, but markets will likely remain curious to see how this week's auctions shake out.

2yr Note Auction is at 1pm, and it could be relatively interesting considering there are two forces that appear to be clashing. In one corner: the recent "immutability" of 2yr yields following the original 2013 target from August's FOMC Statement. In the other corner: Operation Twist! How do markets reconcile the utter stability of the short end recently with the fact that very entity that poured all the concrete on those yields just announced they'll be selling $400 bln of the short end? Should be interesting. But the more interesting auctions could be the next two on Wednesday and Thursday.

The NY Fed has issued frequently asked questions (FAQs) to provide further information about the Federal Reserve’s purchases of agency mortgage-backed securities (agency MBS) related to the reinvestment of principal payments from agency securities.

Read the FAQs here.

Fannie 3.5's have been doing their best to hold onto lows near 102-17 so far today, but have continually find themselves pushed back down to that floor, and in some cases 102-16. We've seen one reprice for the worse, but from a lender that's been prolific in that arena of late.

Now however, things have been low enough, long enough, and look to be under enough pressure for a few other lenders to be considering similar moves. The losses aren't steep or severe enough for a majority of lenders to reprice for the worse, but some might. Chances are much lower among lenders out with rates after 11am.