It's been a light day for new originations so far in MBS with current totals in Fannie/Freddie 30yr Fixed around 1/4 to 1/3 of their recent averages.  That light supply environment, in conjunction with a decent enough rally in broader bond markets has helped lift production MBS to their highest levels since last Thursday.  Fannie 3.5's are currently up more than a quarter of a point at 103-25 (note: chart below shows 103-23 as it was snapped slightly prior to this post).  As far as the broader rally is concerned, 10yr yields are just over 3bps lower, currently trading in the mid 1.94's.  

(source: MBS Live Dashboard)

In the broader markets, volume today is slightly better than yesterday, although totals are still on the light side of normal.  Markets are ostensibly waiting for tomorrow's "second chance" vote among European finance ministers to approve the current tranche of the Greek bailout.  In the meantime, weaker-than-expected Retail Sales helped to pull stocks down at a moderate pace although very much in line with recent examples of "down days."  

With the main items of interest not occurring until tomorrow, bond markets are left to play the range, taking some cues from stock's reaction to this morning's data, as well as simply ebbing and flowing within broader ranges.  Said ranges are broad indeed, as can be seen in the chart below of 10yr yields so far in 2012.  Granted, this is just one of the several ways to infer a directional bias, but things seem to line up well with the long-term, downwardly sloped trend channel seen at the outer limits below.  With this chart in mind, you might also consider that 10's are just seeking out a more central position ahead of potential market movers.  The solid line shows the 1.94-ish pivot point (which has really been more like one side of a BAND of yields between 1.94 and 1.96, with the latter getting more playing time as resistance over the past few sessions).

Although the shorter term break below 1.96 in 10yr yields (seen above) is, thus far, frustrated by the current measure of resistance at 1.94, MBS are doing a better job of breaking their recent horizontal resistance level at 103-18.  Much like Treasuries, MBS have also been operating in a broader trend channel and pivoting around horizontal pivot points.  As seen in the following chart, Fannie 3.5's have had only a brief foray under 103-18 and are decidedly back above today.  But to the point of "ebbing and flowing within a broader range," there's still quite a way to go before they'd be threatening to test the upper end of the longer term trend channel.