Choppy trading conditions continue to expand the already spacious "rate sheet influential" MBS coupon trading range....

The FN 4.5 has traded as high as 102-03 and as low as 101-21. Currently the FN 4.5 is flat on the day at 101-30 yielding 4.278%. The 10yr note is however steady near the lowest yields of 2010. This implies mortgage valuations have tuned out the directional guidance offered by benchmark big brothers and are currently being influenced by MBS market specific trading tactics--- like fast money profit taking. Still no word on servicer buying yet

The secondary market current coupon is about level on the session at 4.278% but it too has bounced around a wide range. Unfortunately the clear constant for "rate sheet influential" MBS is: YIELD SPREADS ARE WIDER AND MBS ARE GETTING THEIR BUTT WHIPPED BY BENCHMARKS

MBS are not the only volatile asset class....the Euro and Stocks are dealing with the rumor mill today. As shared this AM...from the Dow Jones Newswire:

 NEW YORK (Dow Jones)--The euro bounced from four-year lows Wednesday on market speculation that European authorities are preparing a response to the common currency's rapid decline.

Conjecture in the market that the European Central Bank could take steps to try to arrest the euro's decline--which could be becoming too rapid--has helped boost the currency.

The Federal Reserve declined to comment on speculation the ECB and other major central banks are preparing to intervene in the foreign-exchange markets to prop up the flagging euro. The ECB also declined to comment earlier Wednesday.

The market talk comes as traders are circulating a report from a U.S. think tank that is said to note that the Group of Seven leading industrial nations are concerned about the speed of the euro's decline against the U.S. dollar.

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Check out the chopatility. The rumor is not being taken seriously by stocks but the Euro has reacted well (more short covering, lack of liqudity). Perhaps this rumor is being employed by government officials to wash out short positions and put the Euro on more level tactical ground. Sadly, if the rumor mill doesn't produce an end product, the devaluation of the Euro currency will continue.

Just like stocks, the "flight to safety" sensitive long end of the yield curve has not reacted negatively to the forex bailout story.  The 2s/10s curve is flatter at 259bps and the 3.50% coupon bearing 10yr note is 2.4bps lower on the day at 3.33%.  I was looking for more short coverng but Treasury futures open interest is higher as is volume and prices...so we can nix that notion for now, but keep an eye on stocks. If the S&P bounces at 1100 and volume begins to accumulate all positive progress would be lost in 10s and the FN 4.5 would likely fall back to the lows of the day. On the other hand, if the 10yr note yield does not move higher in reaction to the forex/stock lever, then the FN 4.5 should stabilize and prices will retest the highs of the day.

Stay tuned. Chances for chopatility remain high.