Whether it be a factor of the Fed's coupon lift or an exhaustion of selling pressure, benchmark 10s have backed away from 3.50% and we have observed a modest amount of bargain buying on our screens. Volume definitely increased into the bounce and while short covering is noted, money flows improved which is indicative of new money entering the market. If that is the case, this would be the second time we've witnessed real$ wave in a few chunks as 10s cheapen to 3.50%. Of course when I say "volume definitely increased", I must add the caveat that trading volumes in "rate sheet influential" benchmarks are extremely low. So the uptick in volume was all relative.  Furthermore, after that rapid price rise, volume died back down again (ahead of $29-billion 7s at 1pm).

Note the gappy jumps in price...this illustrates a one-way move with little volume resistance against it.  Offers lifted....

The futures led rate rally was great but MBS are operating in a world of their own today.Prices were already appreciating and yield spreads were already moving tighter. This implies production MBS coupons are seeing focused demand from investors. Maybe MBS bargain buyers are the source of strength in TSYs? It's possible...

The FNCL 4.5 is +16/32 at 101-25. I've got the secondary market current coupon marked at 4.174%.

Plain and Simple: we're seeing some signs of life from bargain buyers, but nothing to get excited about, especially with trading volumes so low and price action largely focused around technical inflection levels (implies program traders are at work, not necessarily outright bargain hunters). I bring this up because we are hoping to see real$ wave in a few more longs in the aftermath of the auction as we head into month-end. We are on "Bargain Hunter Watch"

Production MBS coupon prices are in REPRICE FOR THE BETTER TERRITORY