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If you haven't read the following description of the agency MBS settlement process...please don't skip over it as it may save you from having to change your pants when next month's settlement rolls around. If you have read it...go over it one more time just to make sure the underlying logic is clear....

Stocks and bonds rallied hand in hand today after a better than expected 30yr bond auction. Perhaps it would be more appropriate to say a "not worse than expected" 30 yr bond auction as the numbers didn't depart massively from recent trends. But whether you chalk it up to the absence of a negative surprise or the presence of good demand for long term debt, the result speaks for itself as the long bond rallied over 2 points and catalyzed a steepening of the yield curve that left 2's10's 10bps better at 245bps. That's a substantial one day move......