MBS bids are close to morning levels. Spreads vs. TSYs are still tighter as MBS outperforms the steepening yield curve.

1215PM marks...

Since 3pm close

FN30__________________________________      

FN 4.5 -------->>>> -0-09 to 100-27 from 101-04                                      

FN 5.0 -------->>>> -0-06 to 101-31 from 102-05                                  

FN 5.5 -------->>>> -0-03 to 102-17 from 102-20   

FN 6.0 -------->>>> -0-01 to 103-09 from 103-10                                       

GN30__________________________________

GN 4.5 -------->>>> -0-09 to 101-10 from 101-19

GN 5.0 -------->>>> -0-05 to 102-17 from 102-22

GN 5.5 -------->>>> -0-03 to 102-31 from 103-02

GN 6.0 -------->>>> -0-02 to 103-16 from 103-18

There are many possible reasons behind the steepening yield curve. Many are speculating that Tim Geithner may use the G7 meeting as opportunity to step onto his "bully pulpit" and share some economically friendly headline news. Some await finalized details of the Stimulus Package. Others may blame higher rates on a pre-three day weekend lack of market liquidity.

There is one big reason for MBS selling. We are tapped out for now!!! "Up in coupon" will continue to dominate as MBS market participants see no reason to move "down in coupon" while borrowers await "it that shall not be named"...especially when MBS prices are so expensive. Again...high five to the Fed for at least granting lenders the opportunity to pass along some gains (by supporting thinner coupons like 4.0s and 4.5s)