Stocks took a beating out of the gate, setting the stage for slight improvements in both treasuries and mortgage backs. With the Dow currently off 150 points, the 10 year note is up 11/32's but mortgage backs/mortgage pricing is widening, up only 2 to 3/32's. For those of you who made the call last week, you all know what "widening" to treasuries means. Again, thanks for taking the time. I hope it was value added. Stocks were set in motion early this morning on another downgrade of sovereign debt (Italy) which rattled bonds and stocks across the Euro zone. The Chicago Fed Index didn't help either, going negative (-.45) for the month of April after three months of improvement. China's Purchasing Managers Index came in below expectations as well. The new buzz word on the street is "risk off", meaning that given global challenges and stateside economic woes, stocks (risk assets) are not in favor, pushing investors into a capital preservation mode. That's why our market continues to improve. One word of caution on lower interest rates in the works; while we still are looking for a target of 3.0% on the 10 year note, the short term trade looks suspect to a reversal (worsening mortgage pricing). Reasons being are very overbought conditions on our charts coupled with a "bad news gets you very little reward" in mortgage pricing. It is starting to show up in volume measures (low volume) which is an early sign that most investors who want bonds, have them. Good time to pay attention and use the float down.