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Illiquidity Causing MBS Volatilty; Some Risks Might Materialize

If you have automated alerts set to go out based on a certain amount of change, you may have received an alert just now as MBS prices were seemingly jolted much lower.  This primer explains why and how that can happen (and that it's largely an illusion).

Fannie 3.5 MBS are legitimately trading around 102-29 at the moment (+1/32nd on the day) as opposed to 102-26 or even 102-24+ which appeared for a split second earlier this morning.  To whatever extent we continue to trade around 102-29, there is little to no negative reprice risk.

That said, you can always trust what you're seeing in Treasuries, and on that front, 10yr yields are at the highest levels of the domestic session.  If the weakness continues, we could see MBS begin to move lower, and it would only take a few ticks of weakness before a few lenders could consider negative reprices.  10s are currently up .7bps on the day at 2.347.  

MBS / Treasury Market Data

UMBS 5.5
99.48
-0.17
UMBS 6.0
100.94
-0.08
2 YR
4.6221
+0.0541
10 YR
4.2008
+0.0128
Pricing as of: 3/28 2:15PM EST
This Mortgage Market Alert is provided in partnership with MBS Live and provided exclusively to MBS Live Subcribers.