Since the 830am data and more recently, the 10am releases of New Home Sales and FHFA's HPI, the bond market has been highly active and trading in a tight range. Less than 2 bps have separated highs and lows in 10yr yields and FNCL 4.5's have traded between 101-18 and 101-23. If anything, those ranges have been getting tighter since 10am data, suggesting a few things. First, reprice risk is a non-issue in a market this tight. But secondly, that same tightness, combined with the fact that we have the last auction of the week coming up, means are potentially storing some energy for a more pronounced move higher or lower depending on the results. The conclusion is as simple as this: be ready to act, but so far so good.

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*** JAN SINGLE-FAMILY HOME SALES 284,000 UNIT ANN. RATE (CONS 310,000) VS DEC 325,000 (PREV 329,000) *** JAN SINGLE-FAMILY HOME SALES -12.6 PCT VS DEC +15.7 PCT (PREV +17.5 PCT) *** JAN HOME SALES NORTHEAST +54.5 PCT, MIDWEST +17.1 PCT, SOUTH -12.8 PCT, WEST -36.5 PCT *** JAN NEW HOME SUPPLY 7.9 MONTHS' WORTH AT CURRENT PACE VS DEC 7.0 MONTHS *** JAN MEDIAN SALE PRICE $230,600, +5.7 PCT FROM JAN 2010 ($218,200) *** HOMES FOR SALE AT END OF JAN 188,000 UNITS, LOWEST SINCE DEC 1967, VS DEC 189,000 UNITS

WASHINGTON, Feb 24 (Reuters) - The U.S. House of Representatives Financial Services Committee has scheduled a vote next week on legislation that would shut down the Obama administration's key housing rescue programs. The panel's Republican leadership said it will consider a bill to terminate the Home Affordable Modification Program, which it said has failed to help a sufficient number of distressed homeowners to justify its cost. It also will vote on bills to shut down a Federal Housing Administration refinancing program and a program to stabilize neighborhoods suffering from heavy foreclosures. "In an era of record-breaking deficits, it's time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners," Financial Services Committee Chairman Spencer Bachus said in a statement. (Reporting by David Lawder;

S&P futures just went green on the day and MBS prices printed new session lows but remain in positive territory. Stocks are running into technical resistance though so this move may not last much longer. Plus benchmark 10s seem to have found support at 3.46% after profit takers rejected 3.42% for the 2nd time in the recent recovery rally push. We are giving this inflection point much attention to illustrate the bond market's defensive feelings, but do feel, based on the flatter shape of the yield curve, that the rally has more room to run after the auction process is completed at 1pm today. Our next target in 10s is 3.36% if 3.42% is broken. We are looking for the FNCL 4.5 MBS coupon to test 101-28 if that scenario plays out.

The Chicago Fed National Activity Index (CFNAI) is a monthly index designed to gauge overall economic activity and related inflationary pressure. Led by declines in production-related indicators, the Chicago Fed National Activity Index decreased to –0.16 in January from +0.18 in December. Three of the four broad categories of indicators that make up the index made positive contributions in January, but they were offset by continued weakness in the consumption and housing category. The index’s three-month moving average, CFNAI-MA3, edged up to –0.10 in January from –0.14 in December, increasing for the third straight month. January’s CFNAI-MA3 suggests that growth in national economic activity was slightly below its historical trend. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. The consumption and housing category’s contribution to the index improved from –0.43 in December to –0.38 in January, the first increase in five months. Housing starts increased to 596,000 annualized units in January from 520,000 in December, while building permits fell to 562,000 annualized units in January from 627,000 in the previous month.

Fannie Mae (FNMA/OTC) today announced the Servicer Total Achievement and Rewards (STAR) Program, a new effort designed to measure and evaluate mortgage servicers' performance in supporting the housing recovery by helping homeowners avoid foreclosure. The STAR Program provides clear expectations and specific, consistent measurements to help Fannie Mae servicers increase focus on areas of critical importance to Fannie Mae. The program directly links servicer performance to homeowners the servicer has helped, and the customer's experience with their servicer. "We created the STAR Program to promote transparency, accountability and excellence in mortgage servicing and to recognize those which consistently deliver strong, customer-driven results," said Leslie Peeler, Vice President of Servicing Portfolio Management. "The efforts of servicers are critical to preventing foreclosures and providing homeowners assistance. By creating measurable expectations for our servicers aligned with Fannie Mae's business objectives, we hope to sharpen servicers' focus and encourage them to continue to work with us toward our shared priority: keeping people in their homes." A key component of the STAR Program is the Servicer Performance Scorecard, which provides monthly performance snapshots and trends for key performance indicators to help servicers effectively assess their progress. Top-ranked servicers will be eligible to receive incentive awards and recognition. Rankings of top performers will be made available to the public in an annual scorecard.

Benchmark interest rates are off their best levels of the day as stock futures attempt a move from their overnight lows following better than anticipated Jobless Claims data and a mixed Durable Goods Orders report. Production MBS coupon prices are holding steady as Treasury yields creep higher, but this relative stability will not last if stock futures make further gains and benchmarks are unable to reverse course. This behavior illustrates the defensive nature of bond traders. There is a clear inclination to book profits at 3.42% in the 10yr note. This is a firm resistance level but it also makes sense that TSYs would weaken ahead of the 1pm $29 billion 7-year note auction.

(Reuters) - A senior U.S. Federal Reserve official said on Thursday that an improved economic outlook makes it natural for policy-makers to reconsider whether to complete or scale back a $600 billion bond buying program. "The natural debate now is whether to complete the program or to taper off to a somewhat lower level of assets," St. Louis Federal Reserve President James Bullard said in remarks prepared for delivery to a business breakfast. Bullard, an academic economist, is not a voting member of the Fed's interest rate setting panel this year. He is seen as being a centrist on the spectrum of Fed officials, which has opponents of aggressive Fed actions to support growth at one end and advocates of accommodative policies at the other. The Fed launched its bond buying program in November to buttress a weak recovery. The purchases are due to end mid-year and the Fed as a body, at recent policy meetings, has shown no sign of backing away from the purchases, although members have debated phasing it out ahead of schedule or reducing monthly purchases. Bullard said global inflation could impact U.S. prices. "Perhaps global inflation will drive U.S. prices higher or cause other problems," he said. Bullard suggested that one way to look at U.S. inflation could be by looking at whether the global economy is performing at full potential, rather than just looking at the U.S. economy. While the U.S. economy is underperforming, the global economy is very close to or exceeding its full potential, he said. "The global output gap is much narrower or even positive; this would then be interpreted as putting upward pressure on inflation," he said. Bullard further said that adopting an explicit inflation target would be a better way of conducting monetary policy, a likely reference to recent discussions that returning to the gold standard would be a better approach. (Reporting by Mark Felsenthal)

RTRS-US JAN DURABLES ORDERS +2.7 PCT (CONS. +2.7 PCT) VS DEC -0.4 PCT (PREV -2.3 PCT). RTRS-U.S. JAN DURABLES EX-TRANSPORTATION -3.6 PCT (CONS +0.4 PCT) VS DEC +3.0 PCT (PREV +0.8 PCT). RTRS-U.S. JAN DURABLES EX-DEFENSE +1.9 PCT (CONS +4.2 PCT) VS DEC -0.2 PCT (PREV -2.3 PCT). RTRS-US JAN NONDEFENSE CAP ORDERS EX-AIRCRAFT -6.9 PCT (CONS -2.5 PCT) VS DEC +4.3 PCT (PREV +1.9 PCT). RTRS-U.S. JAN GEN. MACHINERY -13.0 PCT, ELECTRICAL EQUIPMENT -4.9 PCT, DEFENSE AIRCRAFT/PARTS +20.6 PCT. RTRS-U.S. JAN DURABLES EX-TRANSPORTATION DROP LARGEST SINCE JAN 2009 (-7.5 PCT). RTRS-U.S. JAN NONDEFENSE CAP ORDERS EX-AIRCRAFT DROP LARGEST SINCE JAN 2009 (-9.9 PCT).

RTRS-US JOBLESS CLAIMS FELL TO 391,000 FEB 19 WEEK (CONSENSUS 400,000) FROM 413,000 PRIOR WEEK (PREVIOUS 410,000)....RTRS-US JOBLESS CLAIMS 4-WK AVG FELL TO 402,000 FEB 19 WEEK FROM 418,500 PRIOR WEEK (PREV 417,750).....RTRS-US CONTINUED CLAIMS FELL TO 3.790 MLN (CON. 3.881 MLN) FEB 12 WEEK FROM 3.935 MLN PRIOR WEEK (PREV 3.911 MLN)......RTRS-US INSURED UNEMPLOYMENT RATE FELL TO 3.0 PCT FEB 12 WEEK FROM 3.1 PCT PRIOR WEEK (PREV 3.1 PCT)..... RTRS-US JOBLESS CLAIMS 4-WK AVG LOWEST SINCE WEEK ENDED JULY 26, 2008 (398,750)....RTRS-US JOBLESS CLAIMS CONTINUED CLAIMS LOWEST SINCE WEEK ENDED OCT. 18, 2008 (3.764 MLN)

The 10-year Treasury note traded in a yield range of 3.49% to 3.42% overnight after giving up three basis points and closing at 3.49% yesterday. Rates are lower this morning as light crude oil prices have hit triple-digits for the first time since September 2008. Riots in Libya continue to spark sell-offs in global equity markets as traders worry about civil unrest spreading to oil other producing countries. “The flight-from-risk theme continues this AM as oil prices hit new highs,” said analysts at BMO Capital Markets, noting that while light crude oil cracked the $100 mark, Brent crude jumped to nearly $120. S&P 500 futures are down 5.25 points to 1,300.25 and Dow futures are trading 29 points down at 12,065. In the first two days of this week, the Dow lost 285 points, or 2.3%. Light crude oil is up for the sixth straight session at $100.63 per barrel, or 2.56% up on the day. Gold prices are 0.42% higher at $1,417.65 per ounce.