Once again we find ourselves in the midst of a violent storm that has gone eerily quiet in anticipation of "something." On Wednesday's like today at least we know what the "something" is. But will this "something" live up to the hype? Is it a turning point for our recently battered MBS, or simply a stopping point on our way to redefining what "doldrums" really are in the face of TARP happiness that has been anything but punctual.

Is that such a surprise really? Or is it more what we WANT to see? Little money has changed hands. That which has was predictibly used to stop the bleeding (if only that purpose wasn't so explicitly stated). The consensus among traders and analysts is that this will take TIME. How much? Don't expect McLovin' to show up at the party until after the new year, but between now and then, rumors of his arrival might well cause the party to pick up a bit. In plain english, there's traditionally a reasonably rough go for MBS heading into 12/31 as balance sheets look better with tsy's and cash. But on 1/1, all bets are off.

Speaking of bets, in recent memory, after a sell-off like the last few days, it's a reasonably safe bet that our RELATIVELY predictable "back and forth" will venture more towards the "forth" direction after such a sell off. Indeed that's the case this AM as not only are we a bit tighter to the curve, but 10 ticks up in both 5.5's and 6.0's bringing the former to 98-00+ and the latter to 100-01. (Let's hope both the former and the latter continue on our formerly discussed ladder,,, )

So what's happening today? Probably one of the most significant FOMC announcements in the history of MBS. I don't write that lightly. We are at a crossroads my friends. We either have 40 years of wandering the desert in front of us, ok, well maybe more like 4 months as the powers that be figure out another way to accomplish their explicitly stated goals of lowering mortgage rates. People! They get it! I know sometimes some of us are inclined to think the gov doesn't have a clue. But that wouldn't make them unique with respect to this "mess." But in analyzing statement after statement and speech after speech in recent memory, more forceful and unequivocal language on "desired outcome of public policy" has been used regarding MBS than we've ever ever ever seen. Know this: the government will continue to take steps to lower mortgage rates because they, as should we all, believe that lower lending rates will be one of the numerous required factors to slowly but surely correcting some of the damage in the housing and capital markets--a hopelessly intertwined construct in the experiment of free market capitalism that has taken on a life of it's own. The beast must be contained or surely it will kill us all.

Enough of that banter... Down to business. Whether you're in the boat, or among the MBS soldiers sallying forth on foot today, the battle may reach critical mass today, or it could be days, weeks, or months yet. But knowing the players that will be on the battlefield today, we must be prepared for anything. As always, we stand ready to sail into the very eye of the storm--the most perilous depths of the maelstrom, all the while crying "HOLD!" until the moment at which we can say for certain that the day is lost. This has occurred on no less than 2 fed days in recent past, and whereas "others" fled, we prevailed--in great amounts too--by Friday. In fact, more frequently than not, MBS have seen better rates on the Friday following a Fed day than on the Monday preceding it. Will that be the case this time? Sadly, if the past were a guarantee of the future, you wouldn't need to read my words now. But considering that equities, commodities, etc.. are up, and that MBS are cajoling spreads downwards with their "sometimes" friends, swap spreads, there is no indication to panic yet.

What is your lender's position today. Find out by comparing how aggressively they are priced. Are they in the market or are they hedged for the announcement? Lenders with a 6.125 PAR are in the market (assuming they were aggressive in the first place- think provident). Lenders at 6.375 to 6.5 are hedged a bit for the announcement. At any rate (pun intended), those who are pricing "on the come" stand as the symbolic snipers in today's battle, who will not hesitate to the pull the trigger on your YSP the first chance they get. As it was yesterday, and as it has been on many a day in the past, there may come a point in today's battle during which you are forced to decide if you will take a hit of an .125 in order to get that back later today or this week.

We will do our very best to set a price at which we will determine that "enough is enough." In the past our stop-loss point, as it were, has been lower than most are comfortable with, but the "most" are not adequately understanding the volatility in the markeplace following the announcement. Whatever you do, have fingers of fury on the refresh button beginning at 2:00, 15 minutes before schedule, but they've been known to surprise before. We'll get you full text as soon as it hits, analysis from others, live shorthand notes from us, and whatever else we can dig up to help you make your decisions. Strategy nothing! This is the real deal folks. Don't touch that dial....