The Bridgewaters, Massachusetts

Prices of Mortgage Backed Securities (MBSs) are nearly unchanged this morning while Treasuries are down 13/32 as traders brace for a record $67 billion in new supply of Treasuries. The 30-Year FNMA 4.5% coupon is currently up 1/32. Meanwhile, stocks opened down on concerns the deepening recession will decimate consumer spending, but have revered course and are now up on the day's trading.

The financial rescue plan to be released by Treasury Secretary Geithner tomorrow is expected to include setting up ‘bad bank' to purchase toxic assets from banks. The government and the rescued banks will each bear some of the risk in the transaction to help ensure that the taxpayers don't overpay for the toxic debt. It's anticipated that the ‘bad bank' could purchase up to $500 billion in toxic assets.

The plan is also expected to include fresh capital injections for the banks as well as a new homeowner aid program.