As we've discussed many times in the past, MBS generally tend to weaken more slowly than Treasuries when bond markets are generally weakening (conversely, they don't tend to rally to quite the same extent during bond market rallies). So to see them significantly tighter (MBS yields and Treasury yields moving closer to each other--in this case, TSY yields rising faster than MBS) this morning after 10yr yields opened almost 10bps higher than 12/30's high 1.8's is not a major shocker. Since then, MBS have mostly marched to the beat of their own drum in terms of yield, which has held fairly steady whereas 10yr yields rallied down to 1.91 by the time FOMC minutes rolled around.

Following FOMC minutes, 10yr yields are back up to the 1.95's, but Fannie 3.5 MBS have remained much steadier by comparison, bringing yield spreads back in line with their tightest levels of the morning. Volume hasn't been especially high in response to the FOMC Minutes, but one might conclude that MBS are willing to outperform because they are widely regarded as the Fed's leading candidate to be the centerpiece of the next round of QE (IF there is a next round of QE). Nothing about the minutes particularly shot down that ongoing possibility, and thus MBS outperform.

Bottom line, if you have colleagues tuned into 10's as their preferred mortgage rate indicator, speak soothing words to them and let them know everything is OK. A few lenders have already repriced positively on the day, and the bigger risk comes from pipeline control (as business ramps back after the holiday breaks) as opposed to MBS price-related risk.

Much of the content in the Minutes of the December 13th FOMC meeting released today were uneventful reiterations of that which has already been said. To wit:

• Several believed more stimulus could be needed
• Stimulus more effective with "enhanced communication"
• Europe continues to be global economic lynchpin
• low mortgage rates having only modest benefit on refi demand
• Inflation is relatively a non-issue, based on expected labor market slack
• Unemployment slow to decline

This familiar cake was frosted with something we know has been in the potential cards since the historically transparent "2013 verbiage" made its debut. At the next FOMC Meeting, the Fed will begin incorporating individual participants' projections into the Summary of Economic Projections (SEP).

"Specifically, the SEP will include information about participants’ projections of the appropriate level of the target federal funds rate in the fourth quarter of the current year and the next few calendar years, and over the longer run; the SEP also will report participants’ current projections of the likely timing of the first increase in the target rate given their projections of future economic conditions. An accompanying narrative will describe the key factors underlying those assessments as well as qualitative information regarding participants’ expectations for the Federal Reserve’s balance sheet. A number of participants suggested further enhancements to the SEP; the Chairman asked the subcommittee to explore such enhancements over coming months. Following up on the Committee’s"

This is a major leap forward in terms of transparently conveying participant forecasts.

Even though the FOMC Minutes are on the near-term horizon (less than an hour away), current gains in MBS are sufficient to see some of the characteristically early-to-act lenders consider offering positive reprices.

Fannie 3.5's are 8 ticks off morning lows, now at 102-26. 10yr yields are down to 1.916 from 1.95 support earlier. Speaking of "early," it's too early to assume we'd see many reprices yet. These MBS prices would need to hold here or be improved upon, preferably through FOMC minutes, although the aforementioned "early actors" might jump in with a small token eighth before then.