10yr yields broke the 3.432 pivot and are now at 3.44. FNCL 4,5's are now in line with their opening lows at 101-27. Lenders who priced between 830 and 930 Eastern may be considering reprices for the worse at these levels.

3.432 marks an earlier high yield mark in 10yr notes today and yields have returned to test that level again. It's holding so far, but if it breaks, it could be a coinciding indicator of continuing pressure on MBS prices. MBS have trended down all morning and would need to break 101-30 in FNCL 4.5's in order to buck that trend, otherwise, risks will continue to increase of reprices for the worse.

Trend Intensity is a common technical study that measures the ongoing difference between price levels and their moving average. Positive or negative deviations from the moving average are summed to provide an index that is meant to indicate the strength of the current trend. Trend intensity peeked most recently in mid December at a level of 30, the highest measurement since yields plummeted in late 2008. As you might guess from the recently sideways range, the intensity measurement is now quite low, having fallen to 13. To put that in context, levels of 8-11 are as low as it gets. Historically it is exceedingly uncommon for trend intensity to remain at these low levels for long. All this to say that trend intensity will be entering it's "trigger zone" on the night before NFP, assuming we continue to trade fairly flat. Ha! This Time! This time for sure! We'll get a breakout!

FNCL 4.5's are 3-4 ticks from their highs of the morning, but remain in the green by 2 ticks at 101-30. 10yr yields meanwhile are at 3.426, which is near the lowest yields seen yesterday. There is no more scheduled econ data this morning. First reprice risk level should be around 101-28, and progressively more serious the faster or further prices fall from there. On the upside, we'd likely need to see 102-06 for a somewhat extended period today, with 102-10 levels making reprices for the better even more likely.

Treasury will sell a total of $72 billion in debt next week. This will raise $50.2 billion in new cash and refund $21.8 billion in maturing securities. The schedule is as follows: $32 bn 3s on Tuesday February 8th, $24bn 10s on Wednesday February 9th, $16bn 30s on Thursday February 10th. In their borrowing statement the TBAC said they expect Treasury to hit the debt ceiling between April 5th and May 31. Treasury does expect coupon auction sizes to be stable in the coming months and any budget shortfalls will be made up by larger bill auctions (less than 1-year maturity also known as discount or zero coupon bonds.)

Although the January ADP Private Payrolls Print was slightly above consensus estimates, it was well within the range of economist forecasts and did not have a negative effect on the bond market. After the data flashed the 10 year note didn't budge from its pre-release marks but production MBS coupons did rally 6/32 higher as the yield curve flattened.

From the Release: Private-sector employment increased by 187,000 from December to January on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from November to December was revised down by 50,000 to 247,000 from the previously reported increase of 297,000. This month’s ADP National Employment Report suggests solid growth of private nonfarm payroll employment heading into the New Year. The recent pattern of rising employment gains since the middle of last year appears to be intact, as the average gain over December and January (217,000) is well above the average gain over the prior six months (52,000). Strength was evident within all major industries and across all size business tracked in the ADP Report. CONSENSUS FORECAST WAS FOR A PAYROLL CHANGE OF 145,000 JOBS