MBS MORNING: TAPPED OUT YET???

Good Morning All. Happy Friday the 13th.

MBS is once AGAIN outperforming TSYs this morning. As I noted last night the MBS stack is a bit pricey at the moment. Mortgage investors would gladly welcome a healthy steepening of the yield curve and some sizeable selling from mortgage bankers....anything to cheapen up premiums!!! MBS gains are losing steam and additional upticks appear to capped. Mortgage rates are however slightly lower again this morning.I am seeing some agressive pricing this morning.

APRIL FN30_______________________________

FN 4.0 -------->>>> +0-01 to 99-03 from 99-02

FN 4.5 -------->>>> +0-00 to 101-03 from 101-03

FN 5.0 -------->>>> +0-01 to 102-10 from 102-09

FN 5.5 -------->>>> +0-02 to 103-00 from 102-30

FN 6.0 -------->>>> +0-02 to 103-19 from 103-17

While stocks rallied and TSY rates moved lower yesterday MBS still managed to outperform the yield curve. Mortgage rates moved marginally lower yet again. Mortgage banks offered up a hefty amount of 4.0 and 4.5 MBS supply which was easily eaten up by the Federal Reserve. Non-public market participants (non Fed) were active profit takers as MBS prices have reached the "expensive" range.

The Federal Reserve announced their weekly Agency MBS purchases yesterday. In the trading sessions between March 5 and March 11 the Federal Reserve participated in $61.378bn Agency MBS transactions. $34bn of which were dollar roll transactions. The remaining  $27.104bn was new MBS purchases. This works out to an average of $5.42bn per day (plenty demand to offset weak supply from originators). The Federal Reserve has now purchased a total of $214bn Agency MBS since January 5, 2009.

Here is a breakdown of their transactions....