After a weak overnight session, bond rallied in the first hour of domestic trading.  That's proven to be short-lived as it's been all selling since 9am.  There were no new events or headlines during that time.  The move is bring driven by asset allocation trades, block trades, and tactical selling of this morning's temporary strength.

Fannie 3.5 MBS are down an eighth of a point from some lenders' rate sheet print times.  As such, a few of the lenders who priced closer to 9am may already be considering a negative reprice.  Lenders who haven't priced yet are obviously at no risk, and lenders who priced earlier this morning (before the rally) are logically at less risk as they haven't seen as much of a drop.

So far, 10yr yields are holding under the overnight highs of 2.6425.  If they break over, watch closely to see if weakness accelerates.  We'll alert you too, of course, but in any event, if that happens, that's when negative reprices would become more likely--just an outside risk for a few lenders at the moment.