When the wire first hit (which we get a bit before the public site is updated), I was concerned that the tail of 3-4 bps would be perceived as a negative in light of yesterday's high yield coming in UNDER previous trading.  But so far, that has been mitigated by only 2/3rds of the bids being at the high and the healthy indirect bid.  The bid to cover is somewhat of a mixed bag at 2.36 in that it's higher than the past, but perhaps not as high as some were hoping after yesterdays 3+ reading on the 10yr. How have markets reacted?

Pretty definitive float vote being suggested by both tsy's and MBS.  Even if you end up locking tonight, it would be utterly premature to let these auction results motivate you to do so now, especially considering the market continues to suggest otherwise. 

This example is even more striking, when we zoom in to a simple one day view of the 4.5...

I wish there was something more dramtic to report, but things have been remarkably calm versus past precedent.  After shooting up, MBS have held a very tight range between 100-23 and 100-26.  This is one of the tightest post-tsy-auction ranges I've seen.  But we're only half an hour past the announcement and volatility may indeed be on the way.  We'll alert you if we fall back in line with the previous lows just before the auction.  But perhaps an even better indication of impending trouble would be 3.39-3.40 range on the ten year.  Would like to stay below that.