The sell-off following the FOMC announcement is continuing but as choppy trades continue hitting at a rapid pace, we're off the worst levels of selling with 4.0's down 7 ticks to 100-03.  It seems at this point, more of a certainty that the sell-off is for real and reprices for the worse will indeed be on the way.  Expect to see at least a .25 hit, and as high as .5.

The below chart in order from top to bottom:

1. full day chart of FN 4.0's

2. tick by tick chart of same zoomed into the narrow time frame surrounding FOMC.

3. Day's action on stocks and bonds by way of comparison.

The short version of our sell off is that it is NOT related to MBS sentiment.  Rather, the market was apparently expecting "more love" for treasuries than it got.  Treasuries suffering as a result, but MBS vastly outperforming.  Still, MBS can't quite overcome this much treasury selling as it would narrow spreads SO much that it would not make any sense to buy MBS by comparison.  Thus MBS are forced to sell if they are to be within even the extremes of recent spread norms.

After the traditional wild volatility following an FOMC announcement, we APPEAR to be settling into a range just over PAR on 4.0 MBS.  This is a very good 7 tick loss considering the 18 tick loss for the 10 yr tsy at the moment.  But of course, it may still be too soon to "call the ball" (although reprices are coming if they haven't already) as far as the final range of the day.