In new released earlier today the GDP was reported at a lower than expected 6.1% decline.  Consensus estimates called for a 5% decline.  Although worse than expected, this is the advance reading and not given as much credence as revisions.  Inflation components within the report were in line with expectations.  Markets have been doing their best to determine directionality following the announcement, but will likely pick up in volume and resolve with the release of the FOMC announcement at 2:15 pm.  Treasuries rose in yield following GDP whereas MBS improved from the lows of the morning of 100-08 on 4.0's up to the highs of 100-17 just after 10:30 after several large manufacturing firms cut their profit targets and said "they saw no sign of the global recession ending any time soon" according to Reuters.  Treasuries rallied appreciabily as well in the hour that followed.

Since 1130 AM however, it has been "back to reality" as both MBS and treasuries have corrected to relatively unchanged levels in preparation for both the impending 7 yr auction and the FOMC announcement.  Currently, the MBS stack looks tolerable:

Since 5pm "Going Out" Marks...

FN30________________________________

FN 4.0 -------->>>> +0-01  to  100-11  from 100-10

FN 4.5 -------->>>> +0-00  to 102-01  from 102-01

FN 5.0 -------->>>> +0-00  to 103-01  from 103-01

FN 5.5 -------->>>> +0-01  to 103-23  from 103-22

FN 6.0 -------->>>> +0-01  to 104-21  from 104-20

GN30________________________________ 

GN 4.0 -------->>>> +0-00  to 100-14  from 100-14

GN 4.5 -------->>>> +0-00  to 102-09  from 102-09

GN 5.0 -------->>>> +0-00  to 103-21  from 103-21

GN 5.5 -------->>>> +0-01  to 103-031  from 103-30

Graphically, we've seen a lot of movement today within our reasonable narrow range (i.e. "range-bound").  Here's the day's trading on Fannie 4.0's, 10yr treasuries, and the Dow:

Looks like we averted the lows of the early morning in our most recent selling-spree which offers a quantum of solace.  But all bets begin to be "off" in a few moments with the release of the 7 yr auction results.  $26 bln will go out the door, $2 bln more than last go-round.  If the steepening trend that kicked into high gear yesterday (longer durations selling off), one would expect the 7 yr to do just a bit worse than the 5 yr.  But given the fact that those considerations are already baked into the price, it will be left to market sentiment to decide if the results are "good enough."  One component under scrutiny is the "indirect bid" (foreign participation), which has been slightly desultory in the previous two auctions.  Anything over 30% would be welcome.  Under 25% and things could deteriorate further.  Bid to cover needs to crest the 2.0 level by as much as possible in order for MBS not to succumb to treasury related selling.

Results out imminently.  We'll be back in a moment.