Fast market conditions exist as traders have gone palms out (selling) on the heels of strong stocks and a weak 7 year note auction.  The auction deserves no better than a C with the yield at 3.141%, 59.3% indirect bidders, and a 2.65 to 1 bid to cover ratio.  Both the indirect bidders and bid to cover were below average.

This one had the tail of a German Shepherd (2.3 bps) versus that of a Rottweiler, adding to the lack of interest.  Both the 10 year and MBS took it on the nose post auction.  At one time, the note was down 1 point and MBS off 10/32’s.

Watch stocks, any close up 100 plus will keep the heat on MBS.