MBS RECAP: 2/13/2012

The Federal Reserve Board on Monday released the orders related to the previously announced monetary sanctions against five banking organizations for unsafe and unsound processes and practices in residential mortgage loan servicing and processing. The Board reached an agreement in principle with these organizations for monetary sanctions totaling $766.5 million on February 9, 2012.

If it weren't for the rather abrupt directional jolts in Treasuries since 11am, we'd say that 10yr yields are trading "aimlessly" higher. Indeed, volume is low, and one has to seek out market moving motivation (as opposed to being uncontrollably confronted with it), but a 1.96 to 2.0 move in the space of a few hours is perhaps too aggressive to be considered aimless. Aimlessly aggressive, perhaps?

With the relatively important Retail Sales report out tomorrow, as well as several other pieces of economic data, combined with the striking absence of any Greek headlines is creating the impression that the 2nd half of today's domestic session may stand out as the last period of relative calm between now and Wednesday's sure-to-be-riveting Eurogroup meeting. Some accounts could be setting up defensively for those upcoming events, but yields got some support after running to 2.0 and are currently at 1.9931.

Treasury volatility notwithstanding, MBS continue to be a bit more even-keeled, still in positive territory on the day, up one tick at 103-15. We got one report of a positive reprice earlier, but it was justified given that the lender in question priced early, and was lagging well behind its normal cohort in terms of pricing competitiveness. Reprices are less likely after the current bit of weakness. And if things got any weaker, there could even be a small chance of negative reprices, though neither are especially likely given the current range.