MBS ALERT: Bond Auction Demand Weak. Initial Rates Reaction Bad

The Treasury just sold $16 billion 30 yr bonds...

High yield: 4.469%.

% Accepted at High Yield: 18.01%

Bid to cover: 2.26

The initial reaction to the relatively weak results has not been MBS friendly. The 10yr yield has risen to 3.52% and  the FN 4.5 has fallen below 101-00.

While this reaction is "knee jerk" in nature, if prices dont rebound soon , lenders will reprice for the worse.

I do however expect a correction