Mortgage spreads are wider to swaps by about 6 ticks this morning. I believe that the widening is a result of some profit taking following several days of gains for mortgages and there is nothing macro-thematic about the move. It is also very quiet and very thin and one large seller or buyer can and will move the market.
Swap spreads in the 5 year sector are tighter by 1/2 a basis point and 1o year spreads are tighter by a basis point.
Swap spreads in the 2 year sector,however are wider by 1 1/2 basis points. That movement is repo related. There was a $14 billion fail to deliver in the 2 year note yesterday and the issue trades very special in repo. In my opinion the tightness of the 2 year note derives from quarter end for several large investment banks as well as from the inordinate buying of the sector recently by foreign institutions.