MBS MID-DAY: Roughly Half of Yesterday's Gains Erased; All Part of the Process?

The day began well enough, with only moderate weakness in domestic bond markets.  Moreover, 10yr yields were doing a great job of holding on to important technical support at 1.95.  The short version of the rest of the day is that 1.95 broke and a classic case of technically-motivated snowball selling carried yields a modest 3bps higher.  If you'd like to hold on to a more positive bigger picture point of view, that's really all you need to know.

If you'd like to know the specific intraday damage, here you go.  It's not the end of the world in terms of losses (roughly half of yesterday's gains), but it seems to have caught mortgage lenders off guard.  Fannie 3.0s are down only 7 ticks, yet lenders have been repricing in droves. 

As for motivation for the weakness, there's nothing salient and satisfying to point to.  Certainly, it had nothing to do with economic data this morning.  Trading levels stayed fairly flat for that.  The biggest factor on days like today is usually the tradeflow shuffle that occurs as a natural byproduct of a big move in either direction.  It's like an afterparty.  Sometimes it's cool, and sometimes this happens.