MBS PRICE UPDATE: Still Sideways

4.0's 3 ticks off on the day at 100-04

4.5's 3 ticks off on the day at 101-14

5.0's off 3 ticks on the day at 102-13

Major ZZZzzz's

And we are seeing lender reprices for the better trickle in.  Of course we can't chalk anything up purely to MBS prices this month, but there are a couple potential reasons.  First of all, the most aggressive lenders ( you know the ones that tend to come out with reprices before the rest) tend to "like it" when they see prices hold steady, even if those prices are down on the day.  Reason being is when MBS are off a certain amount, those aggressive lenders led others by wide enough margins the day before to pull back their rates a bit more than other lenders.  So if things hold steady, it allows them to kick back a little faster a little more than other lenders that maintain direction proportions to MBS prices.

More important though would be the phantom forces other than MBS, or at least that's a fair assumption.  I would bet that the lock volumes over the past few weeks have been higher at many lenders than they are this week when we've seen some substantial price degredations.  The capacity issues are indeed emerging as extremely relevant to price movements.  Sure, it's not as simple as lenders merely getting "caught up," but that does play a part here.  Look at it this way: if MBS prices are relatively stable, and the margins between MBS and rate sheets relatively wide, one of the next things a lender can ask themselves is "ok, how much business can I handle now without overloading the staff, blowing out turn times, and blowing locks."  To whatever extent capacity exists, a sideways pattern in MBS and an unwillingness to dip below certain price floors provides one of the components to allow price improvements.

You won't see this from every lender, but as we've begun to track primary/secondary spreads after the roll, they do appear to be tightening.  If MBS prices can rally, this will give them that much more fuel.  We'll only have to hope that the other "impactors" on rates do not douse the flames as they have recently.