Despite a bit of a bounce back late in the day, MBS sank to 102-00 in Fannie 3.5's by 3pm today.  This was the highest that 3.5's traded the morning of the FOMC announcement that sent them skyrocketing 2 points in the 24 hours that followed.  Granted there's a bit of overrun from the 102-00 mark to the 101-25 "concrete ceiling" that had previously been the closing high, but the longer term chart makes it seem like we're effectively testing our right to continue to operate in this new higher range (102 to 104) as opposed to the previous range (100 to 102). 

We're hoping to see some technical support around current levels.  Even if 102 breaks, we'd expect to see more friction around 101-25.  All that's predicated on underlying markets not getting too out of hand though.   To that end, we have 2.06 and 2.10 just overhead in 10yr yields.  A combination of the ongoing Euro-saga and month/quarter-end position squaring  could keep things rather interesting in that regard through the rest of the week.  Below is a zoomed in version of yesterday's chart. It shows 1)support gave way at the grey line, 2) the overnight move took yields up past the teal line and 3) yields fell back down for a test of the teal line and bounced.  That bounce means a test of the upper red line is still possible in the short term.  That would be 2.087 tomorrow, but there's significant horizontal support at 2.06 and 2.12.