You And Us, UBS.

Headline risk to the MBS market reared it's ugly head today as UBS announced it would raise about 15 billion dollars in capital after reporting a write down of 19 billion.

Lehman Brothers made a similar announcement yesterday saying it would raise at least 3 billion from a preferred stock sale in order to silence their critics.

Despite the big write down at UBS, the steps taken to raise capital is adding reassurance that the mega-financials will weather the storm of the credit crunch.  That would normally be beneficial to MBS in the long run as more liquidity in the markets means more potential buyers.  But that eventuality also assumes a level of quality perception that we have not yet regained in this market.

Even more important is the stock rally that is poised to occur as a result of the news.  In and of itself, that has drawn money out of the bond market.  We've peeled off a good 10 ticks on the 5.5% coupon, down to 100-20 /21.

 Stay tuned for an update following the ISM numbers.