Need to see about changing the lyrics to: "Bring me a higher low!

Even if he can't accomodate, MBS markets can.  Check it out, the red dots are higher lows (there are some lower highs as well, but no song jumped to mind):

As far as the fundamentals driving us into the weekend, not much has changed since AQ gave his rundown in the AM post.  As you can see in the chart, we're obviously well off the lows in MBS and have managed to tighten a bit of the ridiculously wide spreads on the day (only slightly).  For a more tangential explanation, MBS have held fairly steady over the last hour whereas tsy's have gone up in yield after reaching 3.49.   The 10 yr looks like it may retest the teal line around 3.52.  That may cause some late day weakness for MBS, so be prepared for action if either teal or yellow line break...

To get back to the questions we've received on quarter end impact on MBS...

It's generally thought that assets like "rate sheet influential" MBS coupons will not make much progress heading into quarter end as there are better options for "window dressing" (making balance sheets look pretty) such as treasuries.  Two main reasons for this are that the comparably higher credit quality (at least in perception--20 million people can't be wrong) looks better on paper and perhaps the more important of the two--considering that MBS has unknown duration, and that the bulk of the production is in longer durations, tsy's are favored because one can buy a short enough duration with certainty to avoid concerns about extension risk. Which explains why "up in coupon" outperforms "down in coupon" today...

As AQ pointed out in the comments of the last  blog post, the MBS market is super slow today. So why the price fluctuations? The ups and downs you see in "rate sheet influential" MBS coupons is a fuction of sellers adjusting their "offer prices" as TSY prices fluctuate (yields moving and therefore MBS relative values cheaper or richer). So when TSY prices move higher or lower, MBS market makers are adjusting their offer prices to ensure they dont get caught giving up their coupons to cheap.

MBS PRICES

2s vs. 10s : 241bps