This week came alive on Wednesday as investors responded to the re-election of President Barrack Obama as well as the October prepayment reports that were released late afternoon on Tuesday. It was a rough day for mortgages with Barclays MBS Index underperforming Treasurys by 22 basis points and the 30-year current coupon spread widening five basis points to +60 – its widest level since QE3 was implemented in mid-September.

With the status quo maintained in government, Treasurys rallied sharply with 10-year notes surging nearly 1 point as focus immediately shifted to the fiscal cliff issue with the expectation that it will not be resolved before the end of the year. 

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