Bring yourself up to speed here and here and here.

As one might expect, "flight to quality" (ftq) buying is rampant. The 10 year yield plummeted after bond markets opened (from 3.72 to 3.557 currently, the lowest point of the evening).

Equities futures point sharply down. In general, we MBS devotees enjoy downward movement in treasury yields as that provides a downward moving basis for that, against which, we track spreads. But too much demand for treasuries can be "too much of a good thing" as the "Q" in FTQ, is more germane to treasuries. In other words, its a foregone conclusion that headlines such as these--true tape bombs--will greatly reduce risk appetite across all sectors of the capital markets. The question that remains is "To what extent are MBS a risk."

This question has been at the core of our recent conversations and is indeed at the core of any discussion of spread. All this to preface the day ahead. We will not see yields on MBS drop as much as treasury yields. Whether or not they would drop at all would be in more question without the recent federal backtop. In a market where even our government struggles to increase buy demand for MBS, how much have they accomplished and how tight of a spread can MBS maintain into this cataclism of data. How much of the FTQ bid can MBS garner considering Lehman and Merrill's intimate involvement in the sector? If you're a foreign investor, are spreads wide enough yet for you to get on board? All that and more starting at 7:30AM eastern...

above: yellow = 10 year UST // teal = 5.5 MBS

How much of that positive price action can MBS pick up in Asian and European Sessions?