Among the five major lenders, C30 loan improved on average 11.5bps today. 25bp+ gains were seen on the note rates at or below 4.75%. The 4.875 to 4.75% permanent buydown cost are is still viewed as unattractive in most scenarios.

After breaking some resistance (short-term) earlier, bonds almost immediately moved back into their previous narrow ranges of the day. In fact, the move was rapid enough that one might have wondered if we'd now see the other side of the range broken, but 3.425 continued to serve as the line of demarcation for the day. 10yr yields have gone no further. MBS, on the other hand, haven't been at as much risk of violating their lows, but nonetheless did pull back from their highs as treasuries tested support. FNCL 4.5's are currently at 101-29 after getting as high as 101-31. This market needs the likes of ADP employment and Bernanke later this week to wake it up. Hopefully it does so on the right side of the bed.

After reaching 101-31, FNCL 4.5's are back down now to 101-30. 10yr yields rose as well, just barely creeping back into their previous range from this morning. They're currently at 3.412. Volume remains light and volatility low.

10yr notes have finally broken out of the incredibly narrow range that contained all yield movement this morning. FNCL 4.5's are pushing to their new highs as well at 101-29. On such a slow day that has experienced so little downside so far, it's conceivable we'd see a reprice for the better, but a small one. But we haven't seen enough positive movement yet to expect them with any degree of certainty.

The same yields that marked the highs and lows in the first hour of trading this morning have continued to contain 10yr yields into the afternoon. 3.41 on the low end and 3.425 on the high end. And it's the same story for MBS as FNCL 4.5's continue to grind sideways in their own narrow range between 101-26 and 101-28+. Really and truly, this is one of the quietest days in recent memory both in terms of volume and volatility.

RTRS-REUTERS SUMMIT-U.S. DEPUTY TREASURY SECRETARY WOLIN SAYS FORECLOSURE PROBE PENALTIES MAY BE USED TO REQUIRE HOME LOAN MODIFICATIONS

Changes to Federal Emergency Management Agency flood zone maps may cause economic damages to property owners, and governments may need to pay them substantial compensation, according to an article published this week in The Appraisal Journal’s Winter issue. The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest professional association of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute. “Flood Zone Revisions and Economic Loss: An Example from Florida” – by William Cole; Bruce Stephan, MAI; Nathan Chouinard; J. Howard Finch, Ph.D.; and H. Shelton Weeks, Ph.D. – examines how revisions to existing flood zones can negatively affect land value and cause economic loss to a property owner. Under Florida’s Harris Act, as well as under case law, property owners may ask the courts to deem a change in regulation as a “regulatory taking” and may ask the government for compensation.

Scattered profit taking has been noted following the completion of the Fed's latest QEII POMO. This has led benchmark Treasury yields slightly higher and pulled MBS prices back from intraday highs in the process. It should however be noted that both TSYs and MBS are moving in a very tight range and trading activity is still well below-average. Because liquidity is lacking we may see price volatility pick up in the hours ahead but we wouldn't expect too much movement in either direction ahead of Bernanke's Humphrey-Hawkins testimony tomorrow.

RTRS-OBAMA SAYS EVERYBODY SHOULD BE READY TO GIVE UP SOMETHING TO HELP U.S. TACKLE ITS BUDGET CHALLENGES. RTRS-OBAMA SAYS DOES NOT DO ANYONE ANY GOOD TO DENIGRATE U.S. PUBLIC EMPLOYEES. RTRS-OBAMA: CONCEPT OF SHARED SACRIFICE SHOULD PREVAIL IN DEBATE ON U.S. BUDGET CUTS, AFFECTING RICH AS WELL AS POOR.