Both MBS and Treasuries started the day in good shape as a bout of universally downbeat data washed over the Eurozone.  Speculation for some measure of central bank action at next week's meeting (European Central Bank, to be clear) also helped.  German Bunds ended up trading briefly under 0.90%. 

As the day progressed, Treasuries began to outperform MBS noticeably.  This was especially apparent when 10's made new lows heading into 3pm while MBS continued bumping their heads on a ceiling at 102-27.  One of the updates on MBS Live devotes more time talking about this underperformance.  Here's an excerpt:

Long story short, MBS were less attractive at the spread levels achieved this morning.  On top of that, we seem to have some organic resistance at 102-27 in Fannie 3.5s.  This has been an absolutely epic inflection point in 2013 and 2014.  With the exception of the few days at end of May 2014, we haven't closed above 102-27 since before the wild ride after the Fed Announcement in June 2013.

2014-8-27 MBS

Ancillary factors in the Treasury outperformance include the shape of the yield curve today, in that 30yr bonds are crushing 2yr Notes.  Basically, the longer the maturity, the better it's performing today, and the estimated maturity for MBS equates to something slightly less than 10 years.  If we were to compare MBS to 5yr Treasuries, the fight would be more fair today.

Bottom line, Fannie 3.5s are blatantly refusing to break above 102-27.  They're not losing any meaningful ground, but they're certainly not interested in following the late day Treasury rally.  There's really no implication to any of this.  It's only offered by way of explanation for something that may otherwise be counterintuitive.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
99-12 : +0-09
FNMA 3.5
102-26 : +0-05
FNMA 4.0
105-26 : +0-02
2 YR
0.5160 : -0.0120
10 YR
2.3590 : -0.0340
30 YR
3.1020 : -0.0500
Pricing as of 8/27/14 4:56PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:42PM  :  Treasuries Surge Into Close; MBS Not Willing to Follow
10:51AM  :  Bond Markets Off Best Levels After ECB Clarifies QE Stance
9:43AM  :  Yields Stay Low as EU QE Gets More and More "Real"

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "It seems that way when we think about yield vs yield, but keep in mind that the source of the discrepancy and the reason things are so low over there (among other things) is that investors are betting on where yields will go in the coming days/weeks/months. In other words, no one wants to buy German Bunds to earn that nice juicy 0.91% rate of return, but they'll buy Bunds vs Treasuries all day long if they feel that Bunds stand a better chance of offering short to medium term price appreciation. "
DIRK POSTUPACK  :  "I am surprised that the 10 yr isn't drooping more since the European bond markets are significantly less in yield than ours, truly a lure for foreign investors."
Matthew Graham  :  "look at the yield change not the price change (it takes way more price change to move a 3.11% 30yr bond yield than it does to move a 2.36% 10 yr bond yield). The price change being over 1-00 doesn't really matter. Looks big because we're used to following MBS price changes, but it's quite common (relatively) in 30's. "
Andy Pada, Jr.  :  "what is up with the 30 YR TSY?"
Bryce Schetselaar  :  ""
Tim Robinson  :  "What are the actual fees allowable in a VA purchase that the Vet can pay, and up to what amount/% of loan"
Victor Burek  :  "3.1% was their estimate in February of this year"
Victor Burek  :  "CBO has lowered its projection of real growth of GDP in 2014 from 3.1 percent to 1.5 percent, reflecting the surprising economic weakness in the first half of the year."