This is a promising development for bonds, although overall volume today may not be high enough to tell us much more. Yesterday, 10yr yields ticked just briefly into the 3.47's, a move they recently mimicked this morning, and on both occasions surrounded by higher volume relative to surrounding trading. While it's by no means uncommon to see more volume at the widest levels, it at least suggests the support bounce is not merely coincidental. This sets up a range between 3.47 and 3.42 so far today. The closer to the low end, the better MBS should fare. With 3.4474 currently favoring the higher end of the range, MBS haven't mustered much strength to move higher. FNCL's are at 101-27 and would need to either hit 102-00, or stabilize for an extended time over 101-28 for reprices for the better.

Lenders who are already out with prices today may be looking at reprices for the worse, with one major lender already reported to have done so. 10yr yields are back in the range of yesterday's highs at 3.46 and FNCL 4.5's have fallen to 101-27.

As is often seen following the more abrupt movements in bond yields or prices, we have a potential trend channel leading toward lower yields. And we also have the potential that it will be broken RIGHT NOW. Pull up the 10yr chart to see said channel forming from yesterday afternoon through now. If yields move higher, and stay there, then the trend is pretty much over (to whatever extent we're willing to confirm that based on the low-ish volume). MBS do not appreciate this posturing from benchmarks, having dropped fairly quickly to 101-29/101-30. This stands a high chance of improving (say, back over 102-00), if treasuries can merely hold the line at 3.46 and show some stability. Then again, volatility is the cliche descriptor that ubiquitously accompanies options expirations days.

Jan 21 (Reuters) - Bank of America Corp, the largest U.S. bank by assets, reported a second straight quarterly loss, driven by writedowns in the value of its mortgage business. The loss highlights the mixed results of the two largest bets the bank's former chief executive, Kenneth Lewis, made at the height of the financial crisis in 2008 -- the purchase of Countrywide Financial Inc and Merrill Lynch & Co. The purchase of the subprime mortgage giant Countrywide continues to saddle Bank of America with mortgage woes. In the fourth quarter, the bank recognized a $2 billion writedown in value of its mortgage business, and a $4.1 billion provision for future mortgage repurchase claims. But Bank of America's global banking and markets unit, which includes Merrill Lynch's former investment bank operations, reported profit of $724 million.

The turn-around we began to see in 10yr yields yesterday afternoon carried momentum through to the domestic open this morning (ignore that late day spike to 3.46). 10's currently sit at 3.4219. FNCL 4.5's are well off yesterday's lows of 101-28 and back to 102-01. Today is data-free courtesy of options expirations. So we're playing a bit of "wait and see" as far as determining what will rise to the occasion of motivating bond market directionality.