Posted To: MBS Commentary

In the few short minutes after the $40 3yr note auction, MBS have moved sharply into their lows of the day. Reprices for the worse are very possible even though post-auction trading is normally quite volatile. As far as the culprit, here are the relevant bullets on the auction. High yield of 1.223 % constituted an uncommon and somewhat significant tail vs. historical performance. Just over half the bids were taken at the high yield Bid to cover 2.98. Seems high, but last go-round was over 3.0, so don't read too much into it. Primary dealers took 14.41 bln and indirects at 24.25 bln MBS chart: We'd post links to lock section of all your lender's LOS's, but gotta draw the line somewhere. Shorter term deal and can't afford to hold out for a late day correction or the rest of...(read more)