MBS LUNCH: Stock Market Delight, Bond Market In Flight?

Something had to be done to pique your interest.  Sure the S&P is up 5-6 points off the lows of the day, but the effect on bonds has been anything but a "flight."  Here's the rundown:

2pm Markets At A Glance

• MBS 4.5's up 4 ticks on the day at 101-02 after being as high as 101-05 around noon
• Steady upward momentum since 10AM data changed to sideways consolidation in PM hours
• 10yr tsy at 3.34 yield, 11 ticks of price improvement, after touching lowest yields of the day at 3.32
• S&P off  lows less than an hour ago of 1041 and just got capped out right around the 1048 magic number discussed yesterday (38% retrace of recent cycle)
• 117-24 to 117-25 getting the volume vote in futures so although they pushed as high as the 118-00 psych/tech ceiling, look for nominal retracement and unless volume picks up at the end of day, 117-24-25 indeed looks to be the range
• Friday afternoon, typical data dearth + early exits + yom kippur next week
• MASSIVE flattening over past few days now down to 235bps in 2's 10's.  Does that even sound right after 245-255 seemed like new world order for so long.

The Bottom Line

• With 10yr yields still above the critical 3.30 and tsy futures still under their important 118-00 level, aside from the fact that Friday PM movements wouldn't mean much there anyway, it's unfortunately still too early to consider the previous MBS ceiling of 100-28 officially broken.  If this was a thursday PM as opposed to a Friday, then maybe.  
• With that in mind, don't be afraid to lock with the strength here assuming you can find lenders being friendly (i.e. best rates in 4 months?).  but please do understand that locking now is a 100% hedge and 0% prediction of directionality.  We're getting some of the best suggestions in recent memory about a shift in sentiment, not the least of which being the 235bps 2's/10's.  Top that off with (fingers crossed) stock ceiling holding at 1048 and I like it alot (gump?).

MBS, Tsy, and LIBOR