Although trading volumes did pick up around 8:30 and 10AM data releases, there is an apathetic feeling in the air. There isn't much excitement to report in the bond market. We continue to watch the stock lever for directional guidance. If S&Ps break through 1276 resistance we should see rates move higher.

(Reuters) - The White House will announce an effort on Monday to encourage job-creating start-up businesses in hopes of reducing the country's stubbornly high unemployment rate. Senior officials are to launch a national campaign called "Startup America," which will encourage private sector investment in startups and small firms, accelerate research and address barriers to success for entrepreneurs and small businesses. Officials are to announce that President Barack Obama will propose making permanent the elimination of capital gains taxes on key investments in small businesses, a White House official said. That provision was passed in September as part of a temporary measure. Obama's fiscal 2012 budget proposal to be released in two weeks will propose making the provision permanent. Officials will also announce that the Small Business Administration will direct $2 billion over the next 5 years to match private sector investment funding for startups. The money is already in the budget.

(Reuters) - House of Representatives Speaker John Boehner on Sunday said that the United States must continue meeting its obligations to fund government debt or risk a global financial disaster. With the Treasury Department rapidly coming closer to bumping up against its statutory borrowing limit of $14.3 trillion, some of Boehner's fellow Republicans in Congress have suggested that no further borrowing should be authorized until deep cuts are made in federal spending. Boehner, interviewed on "Fox News Sunday," was asked about the impact of a government default if the limit on its borrowing authority was not raised in a timely way. "That would be a financial disaster not only for our country, but for the worldwide economy," Boehner responded. He added, "Remember, the American people on Election Day said we want to cut spending and we want to create jobs. You can't create jobs if you default on the federal debt." Treasury Secretary Timothy Geithner has estimated that unless Congress acts to increase the debt ceiling, his agency will run out of borrowing authority sometime between March 31 and May 16. At that point, the government could default on some loans.

(Reuters) - U.S. consumer spending rose more than expected in December to post the sixth straight month of gains as households drew down on their savings to fund purchases, government data showed on Monday. The Commerce Department said spending increased 0.7 percent after rising by 0.3 percent in November. Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, to increase 0.5 percent last month. The spending figures were included in the government's fourth-quarter gross domestic product (GDP) report released on Friday, which showed the economy grew at a 3.2 percent pace on the back of robust consumer spending. Spending in the fourth quarter grew at a brisk 4.4 percent pace, the fastest in more than four years. While economists see spending remaining strong this year, they expect the pace of growth to be less brisk than in the last three months of 2010. "The question is what is spending going to do in the beginning of the year...Perhaps part of this gain is pulling consumption from the beginning of this year," said Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York.

With stocks teetering on a potential breakout to the downside following the end of an eight week winning streak, bond investors are paying extra attention to the directional movements of equity indexes. The stock lever is indeed in effect today. S&Ps are currently +5.50 at 1276.75. This is a key resistance level in stock futures. If S&Ps are able to move through this level, it could spell trouble for loan pricing.

If we were to base our intraday reprice targets on current MBS indications (FNCL 4.5 at 102-12 ) we'd be looking for reprices for the better as 4.5s approach 102-20 and reprices for the worse around 102-05. 102-08 will provide decent support if prices do fall while 4.5s run into resistance around the 102-16 level.

(Reuters) - Business activity in the U.S. Midwest grew more than expected in January, buoyed by an increase in orders and a stronger employment picture. The Institute for Supply Management-Chicago business barometer rose to 68.8 in January, The reading was 66.8 in December, and economists had forecast a January reading of 65.0. The employment component of the index rose to 64.1 from 60.2 in December. New orders rose to 75.7 from 73.6. A reading above 50 indicates expansion in the regional economy.

FNCL 4.5's are within a tick of previous levels at 102-10 while 10yr yields are marginally higher at 3.3548. Chicago PMI is roughly 25 minutes away at 9:45am. Early thoughts on reprice levels: 102-08 is the recent low in FNCL 4.5's, and reprice risk would begin to ramp up if we fall past there, and more seriously at 102-06. From there, the next band of risky prices lies between 101-29 and 102-00. On the upside, we'd be looking at least for prolonged stability over 102-12 with the better target bring 2 week highs at 102-16.

Before the 830am Incomes/Outlays data, 10yr notes came in the door around 3.365 and FNCL 4.5's at 102-07. This was a bit weaker than Friday afternoon's levels of 3.33 and 102-12 respectively. Since 830am data, however, both have made a small amount of progress with the 10yr currently at 3.3509 and 4.5's at 102-09. Next up is Chicago PMI at 9:45

US DEC PERSONAL SPENDING +0.7 PCT (CONSENSUS +0.5 PCT) VS NOV +0.3 PCT (PREV +0.4 PCT) *** PERSONAL INCOME +0.4 PCT (CONS +0.4 PCT) VS NOV +0.4 PCT (PREV +0.3 PCT) *** CORE PCE PRICE INDEX 0.0 (+0.0299; CONS +0.1 PCT) VS NOV +0.1 PCT (PREV +0.1 PCT) *** YEAR-OVER-YEAR PCE PRICE INDEX +1.2 PCT (NOV +1.1 PCT), CORE RECORD LOW +0.7 PCT ( NOV +0.8 PCT) ***REAL CONSUMER SPENDING +0.4 PCT (CONS +0.5 PCT) VS NOV +0.2 PCT (PREV +0.3 PCT) *** PERSONAL SAVING RATE 5.3 PCT VS NOV 5.5 PCT *** MKT-BASED PCE PRICE INDEX +0.4 PCT (NOV +0.1 PCT), CORE 0.0 (NOV +0.1 PCT) *** MKT-BASED YEAR-OVER-YEAR PCE PRICE INDEX +1.3 PCT, CORE +0.8 PCT *** PERSONAL INCOME +3.0 PCT (2009 -1.7 PCT); 2010 PERSONAL SPENDING +3.5 PCT (2009 -1.0 PCT)