MBS AFTERNOON: INTERESTING HOUR

Post auction MBS behavior has been quite interesting to say the least. A few reprices for the worse were noted and even a reprice for the better (perhaps that lender is getting nervous about their ability to fulfill/deliver their promised amount of loans/MBS?)

APRIL FN30_____________________________

FN 4.0 -------->>>> -0-01 to 100-05 from 100-06

FN 4.5 -------->>>> -0-05 to 101-22  from 101-27

FN 5.0 -------->>>> -0-04 to 102-24 from 102-28

FN 5.5 -------->>>> -0-01 to 103-13 from 103-14

FN 6.0 -------->>>> +0-02 to 104-06 from 104-04

APRIL GN30_____________________________

GN 4.0 -------->>>> -0-05 to 100-07  from 100-12

GN 4.5 -------->>>> -0-07 to 101-25 from 101-31

GN 5.0 -------->>>> -0-03 to 103-08 from 103-11

GN 5.5 -------->>>> -0-03 to 103-23 from 103-26

GN 6.0 -------->>>> -0-01 to 104-08 from 104-09

Here is what started all the commotion:

A weaker than expected 5 yr TSY note auction....

......which pushed 10 year notes yields higher and MBS reacted to the news with similiar behavior. Since then the stack has been finding it very difficult to make up its mind!!!

Check out the choppy price behavior following the auction. MBS follows 10yr immediately following release of auction results. Spreads got wider (red circle 1). Buyers return to market. Spreads got tighter. (Red Arrow/Note: MBS improving and UST10yr not budging). Spreads got too tight (second red circle) and profit takers emerge to push spreads wider again. Then buyers return (third red circle) after second sell off.

White line= UST10YR Price

Teal line= FN45 MBS Price

Phew!!! What an hour....overall MBS is slightly lower vs. pre-auction/morning price levels