MBS RECAP: 10/20/2011

Fannie 3.5's are slightly better than levels seen during their last major bout of weakness today, which in turn is slightly better than morning levels (which themselves are slightly better than yesterday's low). Are we seeing a trend here? Yes.... Trends everywhere point to a sideways or consolidating pattern in anticipation of "something."

The obvious question is whether or not that "something" is this weekend's EU summit, but with yet another summit as early as 10/26 and more summit-related headlines than we'd care to read or even consider, one has to wonder...

One thing's for sure: it's nothing to do with tomorrow's domestic economic data because apart from the ECRI (a traditionally inconsequential broad economic index), there is none.

But there will be some Fed-Speak.

1pm Kocherlakota
120pm Fisher
3pm Yellen

Apart from that, markets remain at the whim (unfortunately) of every little headline out of Europe. Those, of course, don't adhere to a schedule. So between that fact, and the lack of economic data, it could be an interesting day...

The following news isn't "breaking" or even impacting trade any longer. It was scheduled and widely expected, but significant in the sense that it's a milestone in the broader situation.

(Reuters) - Greek lawmakers gave on Thursday final approval for an austerity law cutting wages and hiking taxes, crucial for the country to receive a next batch of bailout funds and avoid bankruptcy.

All but one of the ruling Socialist PASOK party's deputies voted in favour of all the provisions in the law, despite two days of violent anti-austerity protests outside parliament.

Several headlines combined to send MBS and TSYs back to the weaker ends of their trading ranges in a matter of seconds. Fannie 3.5's are down 4 ticks on the day now, falling from 101-13 highs to 101-02 currently. Reprices for the worse are possible, especially from the faster acting lenders, but this could still prove to be a knee-jerk if we give it a bit more time to play out. We'll keep you posted.