The first 3 days of this week have offered a clear correction/consolidation to the strong rally of the previous month.  This had as much to do with timing and technicals as anything else.  In other words, the rally brought yields so much lower, so quickly (relative to other attempts to rally in 2018) that it would have been a surprise to see it continue, especially in the week leading up to an important FOMC Announcement. 

In fact, much of that rally is predicated on the FOMC Announcement happening in a certain way next week.  Given the recent Fed speeches, markets expect more dovishness next Wednesday.  The drop in yields equates to the "pricing-in" of the dovishness.  Reasonably strong jobs data last Friday (weaker NFP, but strong unemployment and wages) caused investors to question the extent to which they should expect a friendly Fed.  Long story short, this has been a week for investors to question the risk that the Fed is actually a bit more optimistic than the current herd mentality assumes it will be.

As of today (depending upon the rest of the day's trading), we could have the first confirmation of a pre-Fed consolidation range.  At the very least, we're seeing more evidence for a near-term ceiling at 2.92% in 10yr yields.  It's now a bit of a competition between 2.92% as a ceiling and the upwardly sloped line marking the correction/consolidation.  Actually, this competition will determine whether we refer to this move as a correction OR consolidation.  A nice ceiling bounce would confirm a "consolidation" whereas a break above 2.92% would suggest a "correction."  

2018-12-13 open

Granted, there's not much of a difference between these two, unless a break above 2.92% gives way to more abrupt selling.  That seems like a tall order given the apparent sea-change in the Fed's outlook, and the absence of huge upside surprises in economic data.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 4.0
101-03 : +0-03
10 YR
2.9060 : +0.0000
Pricing as of 12/13/18 9:24AMEST