The rally is tentatively back on as Fannie 6.0's are now up 6 ticks to 99-31.  The absence of "body blows" to financials today has traders' negative sentiments about MBS waning.  The basis has tightened dramatically as We've gone from 10 yrs out in front by 9 ticks all the way back down to dead even with MBS. 

To clarify, the 10 year is up 6 ticks at 100-28 and a 3.89% yield and MBS is also up 6 ticks (but at a dollar price of 99-31 for a 6.0 coupon or a dollar price of 97-08 for a 5.5% coupon).  Whereas "yield is always yield" for treasuries, it's not readily available on MBS until prepayments and other risk factors are applied to the numbers.  So we can see immediate moves in the "basis" which was defined earlier in the blog today, whereas actual spread takes a bit more "figgerin'"

Whatever the case, float with the gains.  We'll be back later with a strategy going into this evening.