MBS Morning: More Down in Coupon

Good Morning. It's a down in coupon day again....

Fn 4.0-> +0-12+ to 100-16

Fn 4.5-> +0-12+ to 101-29

Fn 5.0-> +0-09 to 102-24+

Fn 5.5-> +0-08+ to 103-02

Fn 6.0-> +0-06 to 103-18

There is word of real money buying this morning, no confirmation of whether or not it is the Federal Reserve yet, but we do know money managers are" in on the bid". The Federal Reserve is expected to use about $80 billion/per month for MBS purchases and the Treasury should contribute about $25 billion plus whatever the GSEs chip in...that said we have lost contact with the float boat. The members of the crew appear to have turned off the radio to enjoy the fresh air and warm breeze.

Market participants are continuing to unwind their flight to safety end of year positions in the long end of the yield curve..the spread between the 2 yr note and 10 yr notes gapped up by 13 bps to 168 bps yesterday. The yield curve steepening continued overnight and has not slowed much early in the session. Here is a snapshot of Treasury prices

2yr-> -0-03+ to 100-01+

3yr-> -0-07  to 99-30

5yr-> -0-12+ to 98-23+

10yr-> -0-22 to 110-10+

30yr-> -2-08 to 126-27

Just another example of why you shouldn't be watching Treasuries to gauge mortgage rates.

Economic data out at 10AM

November Factory Orders

November Pending Home Sales

FOMC Minutes this afternoon