The following is an excerpt from of an update that appeared this morning on MBS Live.  Members will have already seen it.

All About the Franc, 'Bout the Franc, Not Data

If there's one reason that bond markets are in positive territory today, it's the overnight shocker out of Europe.  Reuters can tell you about it better than I can:

Swiss central bank shocks markets with currency 'tsunami'

This did two positive things for US bond markets.

1. It sent the Euro to new 9 year lows.  For the most part, lower Euros correlate with lower bond yields.

2. It suggested that the Swiss National Bank (SNB) firmly believes that the ECB is going to pull the trigger on some serious iteration of QE next week.  Reason being, if the SNB had stuck to its policy of capping the Franc's value vs the Euro, it would have potentially been forced to sell a ridiculous amount of Francs. 

The point here is that, apart from the impact on the Euro (which spills over into Treasuries indirectly), there's also a big, official vote being cast on the likelihood of a big QE announcement.

Yet again, we're seeing bond markets move in a recently familiar pattern.  That includes a big-ticket event causing enough movement to shake things up in terms of technical levels and 'forced' trading (i.e. certain stop-loss levels being hit) followed by those tradeflows running their course regardless of the ensuing fundamental environment.  In other words: snowball rally.

10yr yields are pushing into new 20 month lows.  Fannie 3.0s are once again over 103-00.  Positive reprices are en route or already posted.