Depending on when you looked this morning, MBS prices may have been red or green, and the gap between any two quotes was rather large (a quarter of a point or more at times). This has to do with the ongoing deterioration of liquidity in the MBS market. The following chart explains this best. The green line is what buyers are willing to pay and the orange line is where sellers are willing to sell. The blue lean measures the gap between the two. The higher the blue line, the worse the
As for bonds in general, they were weaker overnight, but have moved back into positive territory in early domestic trading. In the slightly bigger picture, the past few days have been mostly about reacting to last week's Fed announcement. This put general upward pressure on longer-term yields due to balance sheet normalization. Shorter-term yields have been big winners though, as seen by the steepening of the yield curve (green line moving higher).