Today is notification day....the roll is upon us. Here is a snapshot of the stack.

Fn 4.0-> -0-01+ to 101-05+           Gn 4.0-> +0-03 at 101-00

Fn 4.5-> -0-03+ to 102-14               Gn 4.5-> +0-06+ to 103-16

Fn 5.0-> +0-01 to 103-12+            Gn 5.0-> -0-02 to 104-01

Fn 5.5-> +0-00+ to 103-23            Gn 5.5-> -0-02 to 104-06+

Fn 6.0-> -0-00+ to 103-29+          Gn 6.0-> -0-01 to 104-02

We expect market participants to be focused on the February coupons and anticipate a heavier down in coupon bias in the near future as the implied funding cost of the roll is still relatively expensive. Traders are well aware of the disconnect between rate sheets and MBS bids...in their eyes this translates into slower than expected prepayment rates and creates a relative value bid for fuller coupons like the 5.5 and 6.0. The Fed is looking to create a lower interest rate environment but will not overlook a bargain buy...so add a possible "up in coupon bias" (only until the MBS/rate sheet disconnect stabilizes) to the list of potential "speed bumps/roadblocks" on the road to 3.75-4.00 rates.

This morning originators have provided enough supply to offset Fed buying. MBS has gapped up to the rallying yield curve while swaps are mixed. We are collecting data on the buying habits of the Fed in an effort to provide better short term forecasts. As spreads widen the Fed has remained present to control retracements...this will continue and eventually create a "baked" in Fed bid from the market which will also provide added stability.

Now we sit and wait for funding lines to clear and hope for operational enhancements at the lenders...