It would have been one thing if today's rally was on low volume and isolated account participation, but this was not the case.  Volume was roughly 1.5 times normal in most sectors of MBS with Ginnie's taking the cake with 223% of their 30 day moving average.  Fannie 30's were actually the worst at 115% of their 30 day average.  That's always a good sign on these rally days and it suggests the potential beginning of a "bounce" off the failed retest of the 99-20 level on 4.0's.  One of the key concepts of trend analysis is that volume must increase in order to confirm the more readily visible aspects of a particular trend.  Speaking of readily visible, this visible enough for you?  How about a full day of what looks more or less like a straight 45 degree rally to those with anything worse than 20/20 vision:

And though we didn't crack the PAR level on 4.0's that might have been asking a bit much considering the already impressive 19 tick rally.  Treasuries and MBS both sincerely enjoyed the NY Fed's treasury purchasing activities today (discussed in Mid Day Post) with 10 year treasuries shedding a whopping 11 basis points from 3.29 to 3.18.  In addition, the 2's 10's curve flattened a bit to 227 bps by the treasury close at 3pm.  Beyond the Fed Buyback support, rates also benefited from stock weakness, relatively light supply, and the commercial paper trade (see $3.75 bln debut issuance from Microsoft) filling bid-side seats as it locks in it's carry for new issuance.

Other than a few not-worth-mentioning tsy auction announcements, and Uncle Ben speaking in a few moments, there wasn't much other than the aforementioned, technical patterns, and conjecture driving rates and stocks down (155 down in the dow).  To expand a bit on one of the limited factors that did help us, we saw good participation today from more than just the Fed.  As per usual, the Fed was focused in 4's and 4.5's today, and the respite of servicer supply helped those coupons lead the stack.  But the demand didn't end there.  Even though there were plenty of sellers today as well, we saw some renewed interest in the higher coupons following last week's slower than expected prepayment readings in that rate range.  In simple terms, many thought it was time to get out of 6.0's + as the premiums paid for those would not be adequately recouped when borrowers supposedly would be refinancing (and thus paying off) those rates in massive order.  But the numbers showed they weren't paying off quite so quickly.  This is one of the reasons we can see the uncommon dispersion in the MBS stack today with everything from 5.0's up gaining 10-12 ticks.  Broad demand across the stack is a good thing as it makes for less corrective backlash should sentiment change.

Tomorrow will pick up a bit with economic data.  We get international trade at 830AM est and the Treasury Budget at 2pm, the latter containing GSE MBS purchases from April.  The only other calendar worthy item (barely?) is the IBD/TIPP's Optimism Survey at 10AM (probably a non issue).  Of more importance will be that which cannot be seen on news websites and data feeds.  That will be the flow dynamics that begin to emerge as Class A settlement draws to a close tomorrow.  Funding lines will start to be replenished, new forward committments will start to be filled (AKA, lenders take rate locks and "commit" to sell a certain amount of MBS by the delivery of June's coupons about a month from now), and continued analysis interpretation will dovetail into further position taking among the active and diverse participants in this, the golden age of MBS.  If you're looking for those limited and somewhat insignificant scheduled data points, you should be able to find them easily most places and we'll probably have them here as well.  So we might see you back here, we might not.  If, however, you're looking for "all that other stuff that really drives the market," we should start posting around our normal time tomorrow!  See you then...  Graham Out....