MBS have somewhat recovered from earlier weakness, although it has been enough for some reprice concern, so far we've only seen one lender recall.  Here's the earlier alert from MBS Live:

Reprice For The Worse Reported. MBS At Lows.12:26PM

Surprisingly thin volume both at home and abroad is exacerbating Treasury losses. Those losses can be primarily chalked up to a general "risk-on" correction following the EU summit as well as the earlier Fed buy-back in the 30yr sector (not everyone was able to clear their shelves and began discounting afterward).

The weakness, although still contained in ranges has worked it's way down to MBS, which have been doing an impressive job of holding support at 102-03 so far today in Fannie 3.5s, even though 10yr Treasuries, for instance, continue leaking higher and higher in yield. Even so, we just got our first report of a rate sheet recall today and there's a slight risk of more at current levels, but the more pronounced risk would be seen if prices dip under 102-03.

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The following video from the MBS Live Dashboard shows the ongoing support at 102-03, but also some resistance from a moving downtrend in Fannie 3.5's.  Keep in mind that you're looking at a chart of January coupons displayed on 12/9 and December coupons (which were about 9 ticks higher in price) on 12/8.  In other words, MBS haven't really fallen as much as the chart might suggest.

This overlay of stocks and 10yr Treasuries does a fairly good job of illustrating the general unwinding of yesterday's "risk-off" trade.  Yesterday's volume was only so-so, and today's is even lighter, making for increased volatility.

If we take a few steps back and look just at 10yr yields, we can definitely see things honing in on something near current levels by 12/7 and then a break lower yesterday, ultimately erased today.

Here's how that looks after taking a few more steps back and comparing the trends to those of the Euro.  By the time we're looking at this wide a time-scale, we're left with the impression that both TSYs and the Euro are still trending lower.  1.95% looks like a major resistance level for 10's and 1.33 for the Euro.

As far as how this translates to the slightly longer view of Fannie 3.5 MBS, things are looking good.  Even after the roll yesterday, which cost us 9 ticks on charts, we're still holding 102-03.  Recall that we'd previous been bouncing incessantly around 101-26.

Finally, the longer term MBS chart.  Here, things look really bullish.  At least they have been.  The trend channel isn't a prediction for the future, just something to watch so that we can better assess when the trend might be shifting.  For now, intact...  AND it also reinforces the levels at which resistance to further gains was seen yesterday.  There may be ebbs and flows ahead, and it certainly wouldn't be fun to fall to 101-00 next week, but inside the walls of this trend channel is a great place for MBS to be in the big picture.