Good Morning Everyone...Happy Friday. TSYs are selling off on the wings of the curve and rallying through the belly. Today is the last trading day of the month so some MBS market participants will be making duration adjustments to their fixed income portfolios.  Currently the bias is still up in coupon with some market participants nibbling on lesser coupons. MBS selloffs in the short end of the stack will hopefully attract bargain buyers  (come on negative convexity). But then again the short term isnt really our focus right? We are waiting for March 4....

Currently the stack is off its highs of the day and spreads are  wider vs. the 5yr Treasury.

Stock markets are trading slightly above some "scary" technical levels...everything seems to be technical trading as fundamentals are now based two perspectives...WE FAIL or WE DONT FAIL.

Do you ever read Vic's blog?

If not you should!!!

Great post this morning Victorino...CLICK ME TO READ VIC's MORNING POST

Treasury Announces Participation in Citigroup's Exchange Offering

Citigroup is planning to strengthen its capital structure through conversion of a significant portion of its preferred securities to common equity in a series of exchange offers. Citigroup requested that the Treasury participate in this exchange offer by converting a portion of its preferred security to common equity alongside the other preferred holders.

Treasury is willing to participate in this arrangement to the extent Citigroup is able to reach agreement with its other preferred holders, under the following conditions:

    *      Treasury would convert its security to match dollar for dollar the private preferred exchanges.

    *      Treasury would convert up to the $25 billion of preferred stock issued under the Capital Purchase Program. Remaining Treasury and FDIC preferred issued under the Targeted Investment Program and Asset Guarantee Program would be converted into a trust preferred security of greater structural seniority that would carry the same 8% cash dividend rate as the existing issue.

    *      Treasury will receive the most favorable terms and price offered to any other preferred holder through this exchange.

This transaction does not increase the amount of Treasury's investment in Citigroup.

Separately, the Chairman of the Board of Citigroup has informed us that the Company will be altering the Board of Directors so that a majority of the Board will be comprised of new independent directors as soon as feasible.

Citigroup will be taking part, alongside other banks with over $100 billion in assets, in the forward-looking supervisory assessment process announced on February 25, 2009 as part of the Treasury Capital Assistance Program.  In connection with this program, Citigroup will be allowed to apply for additional Mandatory Convertible Preferred securities or request conversion of the remaining preferred held by Treasury into these securities, consistent with the terms of the program.