The market has been focusing on the U.S. presidential election to be held tomorrow since the results will affect outlooks for different key issues "ranging from the fiscal cliff resolution to the Federal Reserve leadership," according to Bank of America Merrill Lynch report released on Friday.

Analysts expect that there might be volatility in rates and agency MBS. They are currently staying with their neutral recommendation and cited the favorable technicals that they expect will push credit spreads tighter unless a broader risk-off trend happens.

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