MBS MORNING: Further Tightening, but Tsy's So Weak, MBS Down A Tick

FN 5.5 30YR MBS = 100-14  .... -0-01 (1 tick)

After an initial fall to 100-14 at the open, it's been a very sideways morning.  100-14 has been the obvious line of support much as it has been an overhead resistance level recently.  This level is further edified by the fact that selling has accelerated in tsy's.  10 yrs are now down over a point and 5 yrs are down 22 ticks.  There is no "big" scheduled data today.  Volume is light and traders appear to be reacting largely to the Citi bailout.  There is a 2 year note auction at 1pm, but it's impact on MBS should be minimal, if anything.

Also, Obama will officially be announcing his financial team in an hour and a half.  This may have an impact as well.  The tightening we saw on Friday was chalked up largely to the Geithner announcement, but I'm not unconvinced that some anticipation of Citi bailout was beginning to be built into the market. 

The "line-holding" by MBS is made slightly more optimistic considering the Dow is up over 300 points.  However, MBS will not be able to fight off a strong "stock lever" effect indefinitely.  As this is typed, the 100-14 level flirts with 100-13.  100-13 is exactly at the 23% retracement level from Friday's lows, so even this would not be a bad range to hold.  We are mostly in "wait and see" mode and will update you as soon as something happens, if something happens.