Driven almost exclusively by European bond market strength (and stock market weakness), Treasuries and MBS began the day in much better territory.  Overnight considerations included weaker economic data in Germany, Italy, and the UK.  German Bunds--the benchmark for European bond markets--fell to new all-time lows and have flat-lined there.

Treasury yields followed during the overnight session, but began moving higher into domestic trading hours.  MBS have similarly been moving lower since the open.  While Fannie 3.5s are still in positive territory on the day, they've fallen enough from some lenders' rate sheet print times that negative reprices are already a consideration (and one has already been reported on MBS Live).