4.0's (and mind you, these are JUNE 4.0's that started off at a roughly 10 tick disadvantage) are at the highs of the day and have nearly recaptured that fabled PAR level.

Here's the stack at the moment.

Since 5pm "Going Out" Marks....

FN30________________________________

FN 4.0 -------->>>> +0-18  to 99-29    from 99-11

FN 4.5 -------->>>> +0-16  to 101-23  from 101-07

FN 5.0 -------->>>> +0-11  to 102-19  from 102-08

FN 5.5 -------->>>> +0-10  to 103-14  from 103-04

FN 6.0 -------->>>> +0-10  to 104-22  from 104-12

GN30________________________________ 

GN 4.0 -------->>>> +0-20  to 99-100-01    from 99-11

GN 4.5 -------->>>> +0-16  to 101-29  from 101-13

GN 5.0 -------->>>> +0-11  to 103-07  from 102-28

GN 5.5 -------->>>> +0-11  to 103-27  from 103-17

10 yr treasuries are up over a point, pushing the yield down to 3.165.

The dow is off 163 to 8411.

Buying is well distributed all across the curve but with a notable "down in coupon" preference congregating around 4.0's and 4.5's.  This coincides with the duration preference exhibited in the treasury sector.  Spreads on the day are off their widest levels, but are wider than mid-day as the treasury rally naturally has longer legs than MBS.  Hey!  We could use a bit of spread widening right now with week after week of annual "tights" (in simpler terms, MBS yields, whether they are holding steady, going lower or higher, have been getting closer and closer to the much lower treasury yields.  Last week this manifested itself with massive treasury selling while MBS sold a bit less).   Analysts at Barclays Capital have actually moved the MBS basis (mbs versus treasuries) to underweight noting (in many more words) that as MBS flourish vs. treasuries, they are becoming less and less of an attractive investment.

But there's a counterpoint out today as well from JP Morgan suggesting that despite the recent spread tightening, history and current fundamentals suggest spreads could go even tighter and are keeping their overweight stance on the MBS basis.  As you may recall from last week's blogs, we tend to side a bit more with the latter.

With only an hour to go before the close, this Summertime snowfall "doesn't show signs of stopping."  At least for today...  The scheduled data calendar will pick up a bit tomorrow and we'll have a fresh set of considerations.  However!  It's quite unlikely that lenders will have passed on the full bouquet of love today, seeing as how we tanked hard last week and this is just one day of an uptick falling on limited data on the first day of Class A settlement (some might call this "coupon rollover").  As such, you'll need to determine how strong the reprices for the better are should you be tempted to lock today.  It's a much higher probability bet to float tonight however and reassess tomorrow as even moderate losses in the AM will likely result in similar pricing to this afternoon.  So by all means, if you already tied up the hammock and have that Mai Tai, keep unwinding!