Good Tuesday AM,

Mortgage Bonds are showing relative strength this morning and are outperforming the ten-year. This always makes me nervous because the treasury markets are much larger than the Mortgage Bond markets and typically, as treasuries go, so goes Mortgages. We would rather see the two moving in tandem or treasuries leading MBS. Perhaps this is happening now. There is some credibility to this when we look at the chart and see that Mortgages have already run all the way to the top of the range and are now touching resistance. From here only two things can happen: we can break above resistance or we can get rejected and head toward the bottom of the range. The news was mixed today and overall provides no help to the markets. The really big days come on Thursday and Friday, with PCE prices and then non-farm payroll numbers. You should still be in defense mode and take each good day we get as a locking opportunity until the markets stabilize.

Please remain safe and healthy, make today great.