Not a good day for fixed income as treasuries lost massively in the long end.  The 10yr was off 26 ticks bringing the yield to 3.01%.  The 30yr was off a full 2 points (64 ticks) bringing the yield to 3.95%.

At any other time in MBS history, this would have led to much more selling than the 3-7 tick losses we experienced today.  And as you know, when treasuries sell more than MBS, it means more tightening.  In fact, it's hard to imagine spreads will move aggressively tighter in the short term and we are probably due for a bit of a spread correction which should happen with the next treasury rally.  If the Fed does indeed announce more "legs" to its treasury buying program, that would create a prime environment for a massive treasury rally in which MBS rally significantly less, thus widening spreads back out to a nominal retracement of the recent gains.  Here's the damage as far as today's closing prices.  All in all, if you saw rate sheets more than .25 worse than yesterday, lenders took back more than they needed to, and all things being equal, should give it back if stability emerges. 

FN30________________________________

FN 4.0 -------->>>>  -0-07   to 100-10   from 100-17

FN 4.5 -------->>>>  -0-05   to 101-31   from 102-04

FN 5.0 -------->>>>  -0-05   to 103-01   from 103-06

FN 5.5 -------->>>>  -0-03   to 103-24   from 103-27

FN 6.0 -------->>>> -0-02    to 104-19   from 104-21

GN30________________________________ 

GN 4.0 -------->>>> -0-06   to 100-13  from 100-19

GN 4.5 -------->>>> -0-04   to 102-08  from 102-12

GN 5.0 -------->>>> -0-06   to 103-19  from 103-25

GN 5.5 -------->>>> -0-04   to 103-31 from 104-03

Represented graphically, you can see the fight that MBS put up versus treasuries that basically rose all day.  Something to watch tomorrow morning would be the tripple bottom that has formed on intraday prices.  You can see just after 1pm, just before 4pm, and again just now that 4.0's have halted right at the 100-10 level.  This is over half a point higher than our long term internal horiztonal trend at 99-20, again suggesting the caution to lock the sensitive deals when a lender looks to be in the game. 

If you didn't lock before today's reprices, tomorrow is a bit of a crapshoot.  On the positive side, the UST10YR treasury has not spent much time above 3.00%, suggesting a stable basis for tomorrow.  On the other hand, when and if that support breaks, it should provide a pretty clear lock indication.  Also, a majority of tomorrow's volatility will likely come on the heels of the 7yr Auction occurring at the standard time of 1pm Eastern.