After a mid morning supply spike from originators the stack has leveled out. Federal Reserve intervention has been light so far this morning.

Over the past few weeks as MBS prices have fallen mortgage banker market participation has tapered off with the majority of their activity being related to making hedging adjustments to protect their pipelines from interest rate risk.  The Ninja reports that this morning originators were selling 4.5 MBS in favor of the seemingly oversold 4.0s....maybe they believe 4.0s will be worth more in the near future????

FN30_________________________                GN30______________________

FN 4.5 -------->>>> +0-01 to  100-20                   GN 4.5 -------->>>> +0-05 to  100-28

FN 5.0 -------->>>> +0-01  to  101-20                  GN 5.0 -------->>>> +0-01 to  101-29

FN 5.5 -------->>>> +0-01  to  102-08                  GN 5.5 -------->>>> +0-00 to  102-15

FN 6.0 -------->>>> +0-01  to  103-00                  GN 6.0 -------->>>> +0-00  to  102-30

The Dow is trading up off its lows of the day and the yield curve is reigning in gains....

According to Reuters, data from the US government's $250 billion capital injection program suggests that banks are not using fed funds to increase lending.

Our response: no crap