The 3.625% coupon bearing 10 year Treasury note is -0-02 at 99-11 yielding 3.704%....back under the all-important 3.71 mid-range level. Benchmark 10yr TSY notes have sold by many  today, however the combination of short covering and spotty demand from "real money" buyers has helped contribute to a sense of stability. This is all being done in WELL BELOW average volume by the way.

The same story applies in the secondary mortgage market, except supply and demand technicals are more supportive for "rate sheet influential" MBS coupons than TSYs. Hence....the  secondary market current coupon is outperforming the progress of benchmark TSYs. Wow. The current coupon is super rich vs. TSYs!

 Yield spreads are tighter for a few reasons:

  1. Thanks to news that the GSEs would be buying "substantially all" 120+ delinquent loans, the "up in coupon" trade is still off limits. READ MORE
  2. Originator supply of new production MBS is still low. The Fed is still buying
  3. TBA MBS trading activity is thin

This is all supportive of MBS "relative value" and the appearance of price appreciations. The FN 4.0 is currently +0-04 at 98-02 yielding 4.186% and the FN 4.5 is +0-04 at 101-01 yielding 4.387%. The secondary market current coupon is now 4.357%.

The main focus of the market is still Greece though. The Euro is making up lost ground against the US$ today. While positive progress has been made ....

...its not so monumental in the grand scheme of things.

In the chart above you can see just how much Greek affairs and EU issues affected the value of the Euro.  Here is the latest news from the WSJ:

"The ministers endorsed a decision Monday by members of the euro zone that Greece be given until March 16 to show progress toward its goal of cutting its budget gap by four percentage points, in gross domestic product terms, this year"

Stocks are heading toward a test of 1090...

Is that a delay tactic to see if the market might just forget about Greece? If it is a delay tactic and the market bites....it could set up weakness to re-emerge down the road. This  implies any rally momentum in stocks would be susceptible to knee jerk selloffs.

If the budgetary concerns of debt holders are truly truly warranted and not just fabricated by the market's recent willingness to focus trading strategies around the volatility  of the marketplace (trader's world)....then today's EU/USD bounce will be short lived and the IMF will be forced to voice its opinion.

This continues to be the general focus of the market...especially with Chinese markets taking the week for Lunar New Year.  The forex market has provided a creditable indication of the market's sentiment on what is turning into one great big escapade. At this point I don't know whats rumor or rhetoric...fact or fiction....I do know that stocks are making positive progress of their own though. Now we wait to see how stocks react to a weak dollar. wE know how this worked out in 2009. Weak$= Strong Oil= Stock market rally fuel...from June to December with only a few disconnected moments. The dollar index is -0.84% today. Oil is +3.94%.

Still selling rates into strength. But...if today's modest rally can extend out a bit more, some price leader type lenders may reprice for the better.