We were dealing with a few trendlines created by the intraday highs and lows both in MBS and the 10 yr tsy.  Although the most recent rally did not prevail in grand fashion, the ininitial trendline we drew for MBS "caught" the falling prices and pulled them back in line with that trend.  Here's what it looks like:

That's just 3 ticks lower than the previous post.  Not too shabby considering the alternative. 

The 10yr also adhered to its trend before falling after the Beige Book (READ MORE) was released (falling in yield).  Rather than improve off those lows as the day winds down however, it paused at a trend created by the 2 lows from this AM.  Here's the visual:

This is an UPWARD (duh...) sloping trend in YIELD, whereas MBS's uptrend is in PRICE.  So MBS gradually improving into the PM whereas tsy's gradually going sideways and worsening a bit.  In a vacuum of data and news, a re-test of the 4.0% level is probable, but no such vacuum exists.  So we'll get a bump one way or the other from data and headlines.  We'd hope to see a break below both that uptrend AND the technically significant 3.92 level in the case of good news and we'd hope to go no higher than 4.0 (ideally 3.97) in the case of bad news.   But if you want, you can forget all that and just know that the PRICES AND YIELDS of MBS and Tsy's fought back well whereas lenders are unlikely to cough up any of these gains today.  Granted, a small % of lenders may give you a little late day lovin', but it would be very late and very small. 

After the initial lock alert today, the following updates--more than anything--have been to let you know what's going on in a general sense.  Sadly, that "general sense" is an extremely flighty and conservative pricing strategy among most lenders that will continue unless the fixed income markets fight off their various demons such as extension risk (no likey duration), inflation fan-boys (they're out there!), Fallacious Fed Funds Futures Forecasters (who think we're looking at a rate hike in the immediate future... lol much?),  and of course the dreaded Bull-Lemming who wants to believe in a "too good to be true" V-shaped recovery for the Global economy.  Personally, I like our chances in the aforementioned fight, but the staff at your lenders AND the MBS market will have to like them too before we get back to a high positive correlation for rate sheets and MBS movements.  Oh, the connection will be there on downswings!  Just not so much on upswings.  Moral of the story: when we put out intraday updates and talk about MBS faring well (or whatever...) don't get your hopes up that you're going to recapture lost YSP in lock step with MBS improvements.  Even if prices were to end where they started, there's a steep price to be paid for the volatility. 

Meanwhile, AQ and I sit deep in our underground lair laughing maniacally on the thought that it has been the same pattern of volatility that has precluded other great turnarounds in ostensible economic recoveries.  Will history repeat itself?  Probably, but whatever the case, it's just fun to laugh maniacally!  Give it a try!  Probably not too much of a stretch for most of us after the past two weeks....

Hang in there folks...