MBS CLOSE: The Shortest Closing Update Ever?

Although this may lead some of you to read the entirety of the post, I'm not sure what more we can offer beyond what has already been discussed for the day.  So rather than force content and analysis where none exists, we'll keep today's close on the short side and simply update you on what has happened between now and the last post: nothing.

There has been no change in MBS prices.  Tsy's as well are mostly unchanged although yields in the long end have inched upward microscopically.  This pushed the 2's 10's curve back above 230 to a level of 236.2 by 5pm.  We've been bringing 2's10's into the picture quite often recently as it has pushed higher.  On their website, PIMCO sheds some light on the significance of this steepening yield curve:

"A sharply upward sloping, or steep yield curve, has often preceded an economic upturn.The assumption behind a steep yield curve is interest rates will begin to rise significantly in the future. Investors demand more yield as maturity extends if they expect rapid economic growth because of the associated risks of higher inflation and higher interest rates, which can both hurt bond returns. When inflation is rising, the Federal Reserve will often raise interest rates to fight inflation."

Whether or not this steepening curve is indeed fortelling the true recovery or is passing as a very convincing head fake, remains to be seen.

Aside from the Fed Minutes tomorrow, another potential headline generator is Timmy G's testimony before the Senate Banking Committee beginning at 9:30 on "Oversight of the Troubled Asset Relief Program."  Be ready for action if you still have floaters.  Until Thursday rolls around, the trading spaces have been and will be so quiet that pins dropping will require earplugs.  Translation, each trade has the potential to move prices more than normal in the absence of healthy volume.