MBS more so than their treasury counterparts are set to finish the week near their highest levels of the day, and mid range for the week. The fact that treasuries are nowhere near their highs of the day, yet are noticeably better than their weekly midpoint should tell you something about the MBS outperformance. More simply put, treasuries were already closer to their best levels of the week coming into today. At 100-07, MBS were near their worst. Chalk that up, in large part, to the massive spread widening brought on by the one-two punch of a mild bond market rally and the GSE white paper with all it's previous "leakage." Rallies generally favor treasuries and sell-offs generally favor MBS in terms of spread. When bonds rallied after the 10yr auction, treasuries jumped out to a huge lead and the soon-to-follow GSE White Paper Uncertainty ensured that MBS would not catch up. So a bit of outperformance by MBS here late in the day is a logical result of spreads being too enticing to pass up. In other words, the yields available to investors on MBS were high enough above treasuries that it was time to buy. And thus it is we find MBS FNCL 4.5's at 100-18 in after hours trade, and a 10yr note yield at 3.642.

In the past hour, both MBS and treasuries have been more sideways and less directional. FNCL 4.5's haven't varied more than a tick, either at 100-14 or 100-15 depending on when you ask them. 10yr notes are hanging around a 3.65 zone. To give an idea of volume, at peak times today, the average volume over 10 minutes was around 45,000 contracts. Over the past hour, that average has dropped under 7000 contracts. At least one lender has repriced again, but this time for the better. And while that may occur from another few lenders, the important part is that risks of reprices for the worse are all but gone.

A nice recovery is underway from previously weaker levels. FNCL 4.5's are up to 100-15 after hitting 100-11 briefly. 10yr notes as well are off their high yields at 3.67, now down nearly to 3.65. This should diminish risks of further reprices for the worse.

A few lenders have come in with reprices for the worse as FNCL 4.5's have stayed at the recently low levels, currently 100-12. 10yr yields bounced at 3.666 and have returned to test that weakest level of the day. This is still the early stage of "reprice for the worse" territory. At these levels, it may not be a pervasive phenomenon, although if MBS or Treasuries break lower, chances could increase. We have an eye toward treasuries here as there is only so much tightening that MBS is likely to do at a time, and a progressively weaker treasury market puts enough perceived pressure on MBS that some lenders will reprice preemptively even if MBS don't warrant it in and of themselves.

In a word: yes. In four words: "a bit too soon." FNCL 4.5's have recently fallen out of the tight range that had contained them between 100-15 and 100-17, currently down to 100-12. This is probably a bit to early to consider a reprice for the worse although it technically COULD happen if you got an aggressive reprice for the better in the 11am hour. The 10yr note has now retraced all the way back to opening levels in the 3.66's. Be on guard now as any further weakening in the bond market from here on out will likely increase risks of reprices for the worse incrementally.

Since hitting their lowest levels at 10:23am, 10yr treasury yields have edged higher in a series of peaks and valleys that form a linear trend channel. That's convenient as it gives us two trendlines to follow (one that connects the lows and one that connects the highs) and note a breakout on either side as a signal that this trend higher in yield is shifting (either to go higher at a faster pace, or to stabilize). Meanwhile, MBS have stayed flat through the same time frame, never dipping below 100-15 after reaching 100-16 at 10:23am. FNCL 4.5's are currently at 100-17, a fact that should allow any lenders who priced before 9am to potentially offer reprices for the better. Some have already been seen.

11:24 11Feb11 RTRS-US HOUSE FINANCIAL SERVICES CHAIRMAN BACHUS SAYS OBAMA PROPOSAL ON FANNIE, FREDDIE "....11:24 11Feb11 RTRS-BACHUS SAYS CONGRESS NEEDS A "REAL PLAN," WILL SIT DOWN WITH ADMINISTRATION OFFICIALS TO FIND COMMON GROUND....11:25 11Feb11 RTRS-BACHUS SAYS CONGRESS MUST ADDRESS GSE REFORM AS PART OF COMPREHENSIVE HOUSING FINANCE REFORM, TO ALSO INCLUDE FHA, THE PRIVATE SECTOR

While one would assume the resignation of Egyptian President Hosni Mubarak might lead to a down trade in interest rate prices as flight to safety bids are reallocated into riskier assets, we are not yet seeing a noticeable shift in money flows. Stocks are however just off intraday highs and Treasuries have run into technical resistance. BEWARE. Pressure is mounting against the intraday case for lower rates. This will be a test of the bond market's bias.