European Central Bank President Mario Draghi is currently testifying before the Economics and Monetary Affairs Committee in European Parliament.  The more he speaks, the more bond markets rally and equities sell.  Among the market moving thoughts shared, Draghi reiterated his stance that the ECB will continue to be constrained by the EU Treaty to not directly inject money via a Fed-style "quantitative easing."  He also noted that sovereign debt spreads will not return to pre-crisis levels and that he had no doubts that recently approved austerity measures implied contracting growth in the Euro-zone. 

Draghi's comments, both in the past and today, have been blunt and truthful.  And the truth hurts the "risk-on" trade, thus benefiting US safe-havens most directly, and MBS to a lesser extent.  Fannie 3.5's have effectively been riding the coat-tails of longer-dated Treasuries, a phenomenon you can see beginning to play out in the video below from MBS Live:

Note that 10yr yields were testing their best levels of the day, but MBS weren't quite there yet.  But even Treasuries are second fiddle to the bigger movers this morning: stocks.  With 10yr yields already in the mid 1.85's, ongoing gains are a bit of a tall order in the context of historical ranges, but stocks have lots of room to slide, and sliding they are:

But the stock losses so far today are relatively small in the bigger picture.  If we zoom out to a broader view, we can certainly see that today's small red candlestick is indeed one of the smaller examples of a down day for equities recently.  But the risk is that an ongoing case is mounting for resistance at the important pivot-point centered on 1227.  There's really a whole noisy range of pivot points here though, so nothing definite can be assumed, but if S&P's have difficulty getting back over 1230, it raises the concern for further losses.

Treasuries are working on a pivot point of their own, but with the exception of the two spikey, panic-driven flights-to-safety several months ago, yields are in uncharted territory.

The same is true for MBS, generally operating at their highest levels since the late September/early October spikes.

Last but not least, while this discussion is interesting in terms of outright levels, we'd caveat the whole thing by saying that volume is fairly low, and is expected to be low on this pre-holiday week.