Volume continues to be quite low owing to the holiday weeks.  This should indeed be the case through the new year.  5.0's and 4.5's have found a bottom at 101-30 and 101-10 respectively and are trading in that range currently respectively.  However this is 10 and 13 ticks down on the day respectively.  If you already saw reprices for the worse, additional dings are unlikely at the moment.

Heading into 2009, things are still looking better as we have still not seen the Fed bid show up to the party.  This potentiality looms yet has not been priced into the market.  In their weekly report on MBS, Barclays points out that the mere "promise of this backstop should keep mortgages trading at least in a range."  There's not much else going on other than the treasury auctions today.  The longest bond was a 2 year auction which saw record demand, but considering the premium prices of the mortgages that are similar in speed, we haven't seen much love transfer from that.  So as previously posited, expect an ongoing disconnect between treasuries and MBS.

Short term lock/float considerations are a crap shoot.  With only 9 days left in the month, plus short days on the 24th and 26th, and closed on x-mas day, there's no telling where the thin volume will take prices, and even then, no telling how much lenders will price into the sheets.  We hope that the shortest term outlooks heeded last week's advice to lock.  If not, then there is not much to go on.  We will get some economic data tomorrow and a packed, short day on Wednesday, but considering how ignorant bonds have been of scheduled data, that will not be of much use to us either.  Since we are at the whim of the day trading patterns that will emerge with this volatile thin volume, that is the only strategy we can use to enter the next 2 weeks.  The likelihood of support for MBS after that time is good enough that if you have more than a few weeks to lock and doc, it's probably worth the risk. But we'll know more about that by the end of the day.