What goes up, must comes down... This is the unfortunate truth we are experiencing this morning in the mortgage backed securities market. To the left is a graph that illustrates that last five day of trading was primarily investors consolidating which has lead to this sell off. Opening interest rates are still very attractive, 4.375% at par for prime borrowers, however I am anticipating a reprice for the worse very soon. I anticipate we will see 4.5% become our par rate by the end of the trading day.
It should be mentioned these losses could be curbed by a strong 7 year treasury auction that is set to go off later today. However I anticipate this sell off is a safety play. Investors are essentially preparing for the long weekend, pulling money out of the markets until they return Tuesday at which time they will re-evaluate.
Long and short, flight to safety is a smart play right now, as they withdraw from the market, borrowers still have an opportunity to lock. Something I am recommending. Lock now and enjoy Memorial day weekend not having to think about market movement.
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