Today may well be the first day of a new trend for MBS, unless Fannie 3.5's regain 101-16.  That achievement will be made much easier if benchmark rates continue to do what they're doing, namely, holding 2.07+ as support in 10yr Treasuries.  The video clip below  shows both of these levels in the short term and the charts that follow provide some longer-term context.

The following is the same chart from this morning's "week ahead" post, updated with recent trading.  The bounce seems more than coincidental.

To personify the markets a bit, this is starting to seem like a tipping point yield that acts a sort of a line in the sand between "possibility that EU situation may turn for the better" and "nope, still crappy."  To be clear:

The corresponding level in domestic stocks could be around current levels, say, just under 1200 S&P.

The level we're most concerned with however, is not in stocks or Treasuries, but rather at 101-16 in Fannie 3.5 MBS.  This has clearly been the dividing line between recent rates and "October rates."  We're more than willing (eager, even) to view this morning's weakness as overdone, and consider the break below 101-16 as a sort of Thanksgiving hangover, or tentativeness, but we'd very much like to see prices stay above 101-16 to confirm that.