Tuesday 9/30 ... Down some more...

5.5's now down 10 100-10 as steam picks up for stocks and consumer confidence stays firm. The sell bias is favoring MBS now and we have tightened further to swaps and have even turned a corner and begun tightening to everyone's favorite dinner guest: treasuries.

In UST's, we're seeing a flattener as the duration that was "panicked" into the market yesterday dissipates. (aka, the yield curve is flattening). This is a logical "tightener" for MBS as duration on current coupons has been extending in recent prepayment reports.

then BAM!

you didn't see that coming did you?! A "ninja star" just flew out of the shadows with some one-of-a-kind street color. He/She/It (the ninja is a true enigma), reports the MBS bid is favoring 5's and 5.5's over the "premium" coupons such as 6's and 6.5's. This is GENERALLY a sign of "down in coupon" movement as the market anticipates increased duration and liquidity in the lower end of the stack.

And like that, Poof! The ninja's gone...