MBS SUPER MEGA ALERT: End Of The World As We Know It?
Off A Cliff... Worse Reprices Of The Year On The Way...
Ever been to a public pool when someone notices something floating in the water that shouldn't be? Basically, Bill Gross dropped one of the aforementioned last week with AAA credit concerns. This has sparked a now 4 day selling spree that is kicking into high gear before our eyes. EVERYONE, servicers, originators, banks, insurance funds, hedge funds, sovereign wealth is getting out of the pool for a water change and decontamination. This is "the great MBS reset." Things will go back up, but not until every last seller gets their fill. Treasury prices are being pulled down almost exclusively as a function of MBS-incited duration shedding. It's a black Wednesday for MBS to be sure, so if you HAVE NOT seen a reprice for the worse yet, probably best to lock 'em up. If you've only seen ONE reprice for half a point or so, be advised another reprice is on the way, at least another half point. As far as "how long till it comes back?" It won't be this week or next till we're back in the previously high range. And perhaps it's better to think in terms of months at this juncture. Treasuries are dependent on MBS today, but we'll be dependent on them on the way back up. One huge mitigating factor is the naivete one must possess to think that the current state of the markets will not be addressed in a "Federal" manner. All we can do is watch and wait (and hope) for that...