MBS is holding steady even as TSY yields fall in the belly of the curve (5s-7s-10s). The Fed began its TSY purchase program this morning which contributed to the brief (hopefully not brief ) increase in TSY prices and drop in yields. This means MBS/TSY spreads are widening up again and MBS is weaker compared to its benchmark big brother...something we dont expect to last for long. Spreads will begin to tighten if history holds...

In regards to Fed TSY purchases.....The Fed came out of the gate in an aggressive fashion...they bought $7.5 billion in TSY notes. Interestingly their purchases happen to coincide with the expected duration of their mortgage backed securities cash flows (you know all the MBS the Fed is buying...that is income). I wrote an explanation of how this process works...remember the government is spending....BUT THEY ARE OFFSETTING THEIR COSTS WITH AN INCOMING CASH FLOW. READ MORE.

APRIL FN30_____________________________

FN 4.0 -------->>>> -0-01 to 100-05 from 100-06

FN 4.5 -------->>>> +0-00 to 101-27  from 101-27

FN 5.0 -------->>>> -0-01 to 102-27 from 102-28

FN 5.5 -------->>>> +0-01 to 103-15 from 103-14

FN 6.0 -------->>>> +0-00 to 104-04 from 104-04

APRIL GN30_____________________________

GN 4.0 -------->>>> +0-00 to 100-12  from 100-12

GN 4.5 -------->>>> -0-01 to 101-30 from 101-31

GN 5.0 -------->>>> -0-01 to 103-10 from 103-11

GN 5.5 -------->>>> -0-03 to 103-23 from 103-26

GN 6.0 -------->>>> +0-00 to 104-09 from 104-09

Matt to follow with some intraday charts...