There were no significant scheduled events in the offing today.  Volumes were down sharply in the bond complex as well (less than 50% of recent highs).  That made for a bit of a slippery slope of illiquidity as last week's short positions were flushed out and day traders chased a few big options trades.  If there was actual underlying inspiration, the best case to be made was for general global growth anxiety with a growing list of anecdotes providing cause for concern rather than hope.

All of the above helped Treasuries rally sharply, with 10yr yields making it as low as 1.628% by the afternoon and officially closing at new multi-year lows.  MBS, on the other hand, had a downright frustrating day.  They were generally unable to take part in the rally.  Fannie 3.0 coupons struggled to return to Friday's best levels whereas 10yr Notes surpassed theirs just after 10am and never looked back.  When MBS got close to Friday's highs, they bounced abruptly and gave up more than half of the day's gains.

The MBS vs Treasury performance is to be expected on a day where Treasuries rally significantly and hit long-term lows.  Lenders are also taking a hit from the increased hedging costs associated with the volatility and ultra fast trip to ultra low rates.  Bonds have to level-off if we're going to see major improvements.