• 4.5's down 5 ticks on the day to 100-07
• 10yr yields relatively unchanged (1 tick down on day) at 3.87
• A look at the important 2yr vs. 10yr spread of 282bps

Whether it was consumer confidence, a retreating stock rally, or the mystery box (more to come on that), bonds got back into their range.  Or rather, treasuries got back into their range while MBS continue to trade in weaker territory today.  To quantify that, 10yr notes are currently unchanged while MBS 4.5's are 5 ticks weaker.  When one of those two is moving and the other is holding still, you're usually dealing with movement in SPREADS. 

Indeed spreads are the main betting implement for those trying to guess what the Fed exit will do to the MBS market.  It makes sense to think of it in terms of spreads because MBS would be at very different levels if the 10yr note were to mysteriously plummet to 3.00.  So spreads give us a basis for comparison.  Hence the term: relative value.  In this context, we can think of the widening that has occurred in MBS either as a function of "getting too tight" yesterday, or we could speculate on a little pre-Fed-exit preemptive widening.  But the former is the more plausible and only certain conclusion.

Speaking of spreads, a different spread metric came into play this morning and may serve as a worthwhile level to watch in the coming days.  Instead of talking about the spread of treasury yields to MBS yields, let's now look at the spread between 10yr yields and 2yr yields just in treasuries: the 2s10s curve.

What do we notice?  First of all, the white circles suggest that there is some inherent resistance for 2s10s to move above 2.82.  But on the negative side, we see that the last time spreads swung so rapidly from 2.68 to 2.82, things looks quite similar in the 10yr chart, and that 10's were content to "hang out" at those higher yields while 2's began to fall.  In this sense, and when the 2s10s curve is under 2.82, there's not as much incentive for 10's to rapidly shed yield to tighten that spread. 

So we'll need to see 2's do a bunch of their own yield shedding if we're to catch any sort of break this week before NFP.  All that notwithstanding, it seems unlikely that MBS would be more predisposed to improve vs. the 10yr than to weaken (today being a good example).  Not trying to rain on any parades here, but don't expect much love in near term.  The best chance for love remains a disappointing NFP.