The only fashionable topic of conversation in financial markets at the moment is the global flight-to-safety.  There are various root causes for this, depending on who you ask, but China is frequently mentioned along with "emerging market currencies."  History has shown a propensity for the panic over such factors to overshadow the ultimate effects on markets, but there is a move into a defensive position nonetheless.

In this case, that has meant heavy selling in equities markets and big benefits for safe-haven assets such as the Yen and US Treasuries.  The move has been abrupt and precipitous (case in point the S&P was flat near all-time highs on Tuesday, so all of the drama has been a 2 day affair so far).

The new resistance level to watch in 10yr yields is all the way down to 2.706 now.  That's where 10's bounced overnight before retracing to 2.761 at the start of the domestic session.

The rally turned back on after that (coinciding with a bounce in the Yen, equities, etc) and 10's made it down just under 2.72, but didn't approach the overnight lows again.  MBS have done their best to keep pace, but the 8 tick gain in Fannie 4.0s vs the 12 tick gain in Treasuries is fairly emblematic of the underperformance.  Rate sheets haven't gotten nearly as much love as Treasuries.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
96-26 : +0-11
FNMA 3.5
101-01 : +0-12
FNMA 4.0
104-11 : +0-08
Treasuries
2 YR
0.3314 : -0.0286
10 YR
2.7296 : -0.0444
30 YR
3.6503 : -0.0317
Pricing as of 1/24/14 12:05PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:02AM  :  'Tail Risk' Situation Boosts Bonds; Strongest Levels of The Day
9:15AM  :  Big Improvements Overnight Moderating Into Domestic Session
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Christopher Stevens  :  "LoanLogics put this forecast out on 1/22 "Expect at least 2.6 in the 10yr in Q1 and 2.3 is likely by early Q2. If that happens there is a very good chance for 2.1/1.9. But before you leap for joy at the thought of refinances dancing in your pipeline, realize they will be nowhere near the same level as Q4 2011 & Q1 2012, in fact they will be lower than Q2 2013. There is very little chance of the 10yr getting above 3.4% in 2014. The likely range is 2.4 & 3.2 with an outside range of 3.4 & 1.9.""
Christopher Stevens  :  "when I first read that I laughed a little but now with a 10YR testing low 2.70's I may be a believer."
Victor Burek  :  "lower rates are ahead, the world economy is no where near as strong as many want you to believe"
Christopher Stevens  :  "be interesting to see how fast MBS catches up to the 10YR rally today"
Christopher Stevens  :  "seems the emerging markets are helping the 10YR again today"
Christopher Stevens  :  "So the Fed is expected to get monetary policy back to 'normal' with these tapers, people get concerned that rates will rise and the dollar will strengthen and low and behold investors start thinking this will send the emerging markets into a financial crisis. And as MG put in his day ahead comments, the risk off trade is on."
Frank Hanna  :  "Moral of the story, rates need to rise, but not at the rate of acceleration we have seen??"
Christopher Stevens  :  "moral of the story is the emerging markets can't handle higher rates. So for now it looks like just the thought of higher rates is pushing money into bonds for safety. Seems to be working out great for the Fed right now. Continue to taper and markets keep rates low. win win"