The post-auction positivity saw a small amount of follow-through.  This normally wouldn't be cause for another update, but in this case it brings MBS to levels that are 4 ticks higher than some lenders' initial rate sheet print times. 

As such, we are probably right on the edge of positive reprice potential for a few lenders.  For those that might reprice, most will probably hold off a while longer to make sure gains are being held.  The majority will likely need to see another 2-3 ticks of improvement before considering reprices. 

It's a bit early yet to assume the positivity will remain, but the initial reaction to the 10yr auction is clearly positive for Treasuries and MBS.  Compared to a "when-issued" yield (similar to a 'forecast,' but market driven) of 2.744, the actual high yield came in at 2.729.

Demand was robust to say the least, with the strongest ratio of dollars bid to dollars auctioned since December 2012 (2.92 today vs 2.95 back then).

10yr yields had been trading at 2.735 ahead of the auction and are 1bp lower now at 2.725.  Fannie 4.0s added 2 ticks, moving up to 104-06 (total gain of a quarter point on the day).

These levels have been holding for several minutes now.

Keep in mind that if you're looking at a 2-day chart of MBS Prices, they will look lower today vs yesterday.  In fact, this is only because April coupons are on the right side of the chart while March coupons are on the left.  April coupons were always priced that much lower than March.  We simply switch our focus on roll day, making it look like prices dropped.  They did not.

As for the events underpinning the strength, there's nothing too dramatic afoot.  Treasury yields followed Asian equities markets early in the overnight session and European bond markets in the second half.  10yr yields hit the domestic session roughly 1bp lower and have fallen another bp so far.

MBS's first move of the day was sideways to perfectly unchanged levels.  They've since added 4 ticks (.125) in both Fannie 3.5s and 4.0s.

The only significant calendar event for bond markets hits at 1pm with the 10yr Note auction.