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Of course there was the initial news this morning that Greece's Prime Minister George Papandreou called for a referendum of the recently agreed-upon conditions of the Greek bailout which ushered bond markets to their best levels since 10/6. We noted the drama HERE . But said drama continued to unfold as newswires crossed later in the day, the first saying that there was too much opposition in the Greek parliment for the referendum to take place and the next saying that it was essentially "back on...

Indecisive investor attitudes carry over into the week ahead where two major events are seen shaping outlooks. The U.S. Federal Reserve will conclude a two-day monetary policy meeting on Wednesday afternoon with the release of the FOMC Statement. We expect the Fed to confirm an end to its second Quantitative Easing program (QEII) and indicate that further quantitative easing measures are totally dependent on new economic data developments. The Fed's current stance calls for economic growth to pick...

Scattered reprices for the better were reported today. Rate sheets are about as strong as they've been in a month. Price action in the bond market was a little odd though.... S&P futures ended the session +0.75% at 1340.75. Oddly enough, the benchmark 10-year note also enjoyed a nice little rally. 10s are going out +15/32 at 102-20 yielding 3.309%.This is the lowest 10yr yields have been in over a month. Although MBS lagged TSYs badly today, the rally in the long-end of the curve still led FNCL...

"This is your central bank. This is your Federal Open Market Committee. This is your country. May we all hope that a kind providence will give us the wisdom, the judgment, the patience, the tact, the diplomacy, and the courage to do what seems right and best day by day." ...

The Federal Reserve has released the Minutes of the Federal Open Market Committee Meeting held on April 27-28, 2010. MBS are steady after the FOMC minutes, having traded in a tight range since shortly after 11am. Currently FN 4.5's are up a tick at 101-31. 10yr treasury yields have come down a bp since FOMC, potentially a good sign for MBS to stage another test of 102-00. Currently, yields are about half a bp higher on the day at 3.357. ...

There just isnt enough participation in the rates marketplace to push the 10yr contract through the above discussed layer of "position resistance". Barring a tapebomb before the FOMC statement is released at 2:15pm tomorrow, the best we can hope for is that 10s keep testing this layer of position resistance. On the flip side, in terms of room to run in the downside direction....on Friday there was a hefty amount of "buying at the lows", which put a level of "position support" under 10s. Unfortunately that level of support is concentrated at lower price levels, so there is a possibility that we see more weakness in 10s before the FOMC release. Overall...we are likely stuck in this range until an "event" moves enough money in the same direction to take out positional resistance. Where 10s go...current coupon mortgage-backeds will follow. REPRICES FOR THE WORSE AT 100-20....

I do believe a Fed Statement that highlights SUBSTANTIAL RESOURCE SLACK and STILL WEAK INFLATIONARY PRESSURES will be beneficial to the bond market...in the short run. However, further ahead, as in EARLY 2010, I find it difficult to present an argument for higher or lower rates as most market participants will be starting fresh, looking at data for directional hints and trying to figure out how regulatory reform and the Fed's exit from several liquidity facilities will affect the yield curve. But again...I think I have also made it clear that I see more reason for rates to rise than to fall in Q1 2010. ...

It's not so much that the past three days have been remarkably good for MBS prices, but rather that an extended period of relatively stable bullishness that began in August merely made it two ticks higher than previous. In other words, this isn't so much about something unique happening versus the last four months, but rather about recent data and events giving just a little extra boost to a very narrow range over the last four weeks. Indeed, when you see the daily chart further down the commentary, the rally over the last few days doesn't seem out of place at all in that context. But let's start with today's action:...