MBS underperforming Treasuries

From BNP Paribas MBS trading desk:

"MTGS -  are under pressure into the treasury rally.  Lower     

coupons are lagging 10yrs by 3 to 4 ticks, and after adjusting for lower vol OAS' are 4 bp wider.  Higher coupons are getting 

smashed, 5 s and higher are down in price on the day.  Flows  

on the quiet side and we are seeing a small amount of          

origination in 4% and some overseas buying.  We have shortened durations another 10% this morning and believe performance will be directional.  Until we see a spike in origination, we don't 

expect any massive widening in a selloff.  Current coupon is   

meaningless as FN 3.5% are at 100-10 and nothing has traded on 

screens today and less than 10mm yesterday.  We are a better   

seller of 4% and 4.5% outright."