Alright alright alright...

Mid-terms are done. The Reds took the House and the Blues maintained their stronghold in the Senate. The bond market will view this as a fiscal policy positive, so will the dollar. Yeh that's great and all but who knows how much progress our politicians are capable of making.  The Congress is now split and party lines are clearly drawn. Gridlock is the obvious outcome...but maybe, juuust maybe some common sense will creep into the decision making process? Don't hold your breath...

I see political bickering taking a backseat to Fed policy and their communication strategies. 

With our budget deficit approaching $1.3 trillion and almost 15 million people out of work (plus discouraged), our economic outlook turns from tactical to strategic, from short term stabilization to long term recovery. Ben and the Board will announce further accommodative efforts this afternoon.  They will openly communicate their inflation targets and explain their easing efforts to the marketplace.  This puts political pressure squarely on the shoulders of the Fed and increases their accountability in the eyes of American taxpayers.

Plain and Simple: The Fed is in control of our future...in Ben we trust.

Ahead of the 2:15 FOMC announcement the yield curve is bull flattening and "rate sheet influential" MBS coupons are well in the green.

The 2s/10s curve is 5bps flatter at 219wide. The long bond is the top performer. 10s are +14/32 at 100-23 yielding 2.543%. The December delivery FNCL 3.5 is +0-12 at 100-26. The FNCL 4.0 is +0-08 at 103-04. Flows are light. Loan pricing is improved.

FNCL 3.5s are now outside the range and heading back toward QEII sugar high territory...