It's off to the races so far this morning as MBS and longer-maturity Treasuries are rallying significantly.  Rate sheets have followed with some of the best offerings of all-time being discussed on the Dashboard.   Some of the later days in September had been a bit nerve wracking as bond markets corrected fairly sharply following the Rally that came with the Fed's announcement of Operation Twist as well as the specific mention of MBS Reinvestments.  Even though I've been fairly adamant about 3.5 MBS coupon production being "too big a shift" to be so rapidly undone, I still find myself breathing somewhat easier this morning to see just how perfectly reality is aligning with expectation. 

Stocks are testing some ugly, scary lows.  They'll probably bounce, but unless NFP beats big, it's only a matter of time. Here's a slightly longer-term chart of S&P's and the importance of the low 1120's:

Before falling to test those lows, stocks got a bit of a shot in the arm by halfway decent economic data this morning.  To some extent on the MBS Commentary posts, but even moreso on the Dashboard, I've been leaning toward the stance that domestic economic data isn't as important as it normally is (due to Europe and Twist).  Earlier this morning, it looked as if stocks were about to put up a big argument, but they soon turned lower, and Treasury yields went with them:

Treasuries actually began their bounce before stocks and the reason may have to do with the mid-point of the Trend Channel that I introduced nearly a month ago.  I've continued to post that same trend in various formats and recently noted:

"This should provide some context for experiencing any more weakness this week.  As you can see, we could be well up into the 2's before the broader trend of improvement is threatened" from THIS POST.  It turns out to have provided context quite well as the upper limits essentially marked the highest bounce for 10yr yields.  We then closed out the month/quarter trading in a narrow grind around the mid-line, and this morning, part of the earlier bullishness could be due to a technical break lower from that mid-line:

Whatever the cause, the trend remains clear, and I'll continue to update you on it as long as it remains intact and/or relevant.  As far as the impact on MBS this morning, although we're rallying with Treasuries, we're not quite keeping up and have a bit of technical resistance overhead at 103-06.  We poked through briefly a few times, but as of now, it continues to hold: