MBS MID-DAY: Reprice Risk Mostly Dry as Bonds Cope with Post-Data Weakness

The day began on a strong note with US bond markets led higher in price by an even stronger overnight move in Germany.  Following the mornings' economic data, MBS and Treasuries fell back into just slightly negative territory.

The last update on MBS Live noted that reprice risk had dried up.  That's still true as we head toward the noon hour, but only "mostly" true (in the same way Prince Westley was only "mostly dead" in the Princess Bride).

Fannie 3.0s are down 2 on the day with some lenders looking at 3/32nds of weakness since morning rate sheet print times.  This is NOT typically sufficient for a negative reprice, but it's close.

As of right now, 10yr yields are putting in their second bounce at 1.996 highs.  That's positive, as long as it holds (they didn't bounce hard).  If 1.996 breaks, we'd expect MBS to be insulated from the weakness, but perhaps not enough to avoid being dragged down past that "-4/32nds" line in the sand that connotes more reprice risk.

The next scheduled even is the 7yr auction at 1pm.  While the auction itself isn't typically a market mover, the end of the week's auction cycle can occasionally mark a shift in momentum.  More often than not, it's positive, but it can go either way.