MBS RECAP: 9/28/2011

Things have no doubt been volatile this week. We continue to hear and see that this has more to do with month and quarter-end position squaring. With two more trading days left in September, that means we may well continue to see volatility seemingly unrelated to the economic events in the marketplace.
But economic events certainly can still move things as well, even if they're not doing the heavy lifting. Here's what's on tap tomorrow:
830AM - GDP
830AM - Jobless Claims
830AM - Corporate Profits
830AM - Fed Speak: Rosengren
830AM - Fed Speak: Plosser
10AM - Pending Home Sales
1PM - 7yr Note Auction

With tomorrow's auction being the last of the cycle, there may be some latent relief bid waiting in the wings. Either way, the bottom line is to not let the volatility bother you too much as long as the 10yr benchmark is staying inside a range, probably marked by 2.06 on the upside, or by a Fannie 3.5 MBS price of 101-25 to use a metric specifically focused to MBS markets. The link below has additional info on tomorrow's data, as well as Friday's.

Fannie 3.5's are back over 102-00 now following a strong 5 yr note auction and a helpful stock lever. S&P's have slid to 1166.38 after being as high as 1183 this morning. The stock lever has generally been connected, and in conjunction with a strong 5 year auction, brings 10yr yields to 2.01. Fannie 3.5's are now 3 ticks in the green at 102-09 and reprices for the better are possible if prices hold even remotely close to these levels.

Depending on when you got rates this AM and depending on how aggressive they were, some lenders could be considering an early reprice for the worse as MBS remain under constant pressure.

Fannie 3.5's are right at 102-00. Reprices become more likely below that level and less likely if prices manage to move gradually higher. The 5yr Treasury auction takes place in an hour and a half, and is the only major economic event on the schedule during today's session (Bernanke speaks this evening though).