Despite MBS performing slightly better than tsy's at the moment, the general theme of the week has been to hold steady while tsy's rally.  The 3 day chart of this week's price movements so far does an amazing job of conveying this.  We have the constantly revisited internal trendline (also the weekly MEAN, also the weekly MEDIAN!  Could it be important?) of 101-27. 

Looking at that perpetual search for the center in the context of generally bearish price movements on the week and the generally bullish movements in tsys, the picture rapidly comes into focus. But our friend Astro only need worry about MBS to whatever extent spreads continue to widen as the downward sloping trend channel is a product almost exclusively of that widening and not some broader weakness in bonds (as you'll see in the lower portion of the chart!).

So what's up with that volume spike?  Kinda hard to tell if it rose to CAUSE the drop in yield or in RESPONSE to it.  Plus there looks to be another spike following shortly thereafter.  Let's dust off the microscope...

Like the chart says, volume spikes occurred INSIDE the lowest and highest yields.  The is a good example of the range trade at work.  Econ data catalyzed the movement, and assumptions about the range took over.  Given that yesterday's low yield range centered on 3.32 as well it's HUGELY important technical significance in terms of being nearly a 5 month high in futures, the volume rose in RESPONSE to yields dropping.  It gave yields a reasonably hard push, and only let up when they were staying up of their own accord.

Then a majority of the second spike occurs BEFORE yields peak... Fundamental picture aside, from a technical standpoint, this suggests that the market simply wanted to push yields to the other extreme of the recent range, which in this case, would be at whatever point yields begin to collide with the upper teal line from the last chart.  With the fewer and certainly "noisier" touches that the yields make to their lower trendline, I'm inclined to entertain something more horizontal around 3.32 today than I would be a continuation of the downtrend in yields.  If we get it, that's great, but under their own power, it's unlikely 10yr yields want to go THAT far down today.