It's a strange day when we can say "the 10 year note has continued to sell off, now back up to around a 2.75% yield."

At any point pre-meltdown, this would have made the PAR rate on a 30 yr fixed look more like 4% (or lower) that the current 5.0%.  MBS Started off on the downside at the open and during the course of the long-winded typing that will now follow, have eked out a 10 and 13 tick gain in the 5.0 and 4.5 respectively, putting the former at 100-29 and the latter at 99-24.  Rolls are firm with the impending January coupons only off those levels by 4-5 ticks (more on that below).

Looking for scheduled data?  Sorry, no dice.  The calendar is bone dry stateside, save for treasury auction announcements.  We'd need to see some pretty wild surprises for those to have an impact on MBS.  Another item likely with little to no impact is PPI numbers in the UK.  Sometimes it's courteous of us to know what's going on in this "global economy" that everyone keeps talking about.  Cheap money is cheap money no matter the inflections in your english, so as long as the inflation boogie man remains a distant memory, the doors remain open for the more aggressive Euro-zone rates cuts.  And the lower cost of funds for our global market participants the lower the potential mortgage rates for us.  There's probably more DISconnection there than INTERconnection, but hey!  What else are we going to talk about today?  And what better way to sound intelligent at your next cocktail party than to bring up the PPI in Great Britain!  Use your best Connery-esque accent, and well, any other mortgage types at the party will be greener with envy than the 3 manzanillas in your medium dry Grey Goose.

What Else?

Oh yeah!  The Roll!

It's beginning to look a lot like Christmas, or at least a lot like MBS Christmas as we'll finally get to move on from the "difficult to trade" December delivery coupons and move on to January.  The gaps between December and January have been a bit tighter than normal.  This means that the price of the impending January coupons are slightly higher than is historically normal.  All things being equal, this is good for MBS.  We've feared (and continue to fear) year end balance sheet concerns, and may well have to take a bit of a retracement before the new year, but the "roll" is a generally supportive time for MBS (despite what other self-anointed analysts may say about "losing" x amount of ticks). 

There's further reason to be optimistic....  We still haven't "felt" the impact of the Federal reserve's "promissory note" (they sent me a note saying they promised to start buying a bunch of MBS).  This money, we hope, will be seen before year end.  Even without that, support is coming from other places such as slowing prepayment speeds (that's another lesson for another time, but in short: investors likey).  Also, though we rarely discuss CMBC (commercial MBS), they have been having a rough go of late and though limited, they do exert a bit of an effect on MBS.  They had a tremendous tightener on Friday which, at the very least, is not a bad sign for MBS. Finally, there's that whole Wall Street Journal "story" the derivations of which have been flung far and wide. 

Whether it's tangible, real, or whatever...., this is the same thing we've been opining on for what seems like months.  Ever since the fateful day when both Paulson and Lockhart said the words: "MBS Spreads," (and something about wanting them to tighten), we knew that "something big" would be happening.  Happen it did as the $500bln injection was announced.  This in and of itself may have the legs to get us to 4.5%.  Rather than some startling revelation that the news media (which has so kindly blown this out of proportion to the point where consumers now believe they can actually get 4.5%) made this out to be, this is more of a Machiavellian, results-based initiative.  If we were to be at or near 4.5% already, likely nothing would be done.  Still, it seems that the justified means might be intending and "end" of 4.5% being widely available at the retail level.  To do this, the fed would beed to start buying 4.0's.  Today is the first day in the past several years that the 4.0 coupon has appeared on my trade screen.