After putting in their weakest levels of the morning following news that Treasury will begin to sell their MBS holdings, 10yr benchmarks and FNCL 4.5's are progressing sideways in a tight range just off those lows. 10yr yields are currently at 3.347 and haven't deviated from those levels by more than a bp since coming off the highest yields just over 3.46. FNCL 4.5's are down 15 ticks on the day at 101-31. There's no more scheduled econ today.

(Reuters) - The Supreme Court let stand on Monday a ruling that the U.S. Federal Reserve must disclose details about its emergency lending programs to banks during the financial crisis in 2008. The justices rejected appeals by a group representing major commercial banks of last year's ruling by a U.S. appeals court in New York that required disclosure of the lending records. The Obama administration said the appeals should be denied. It said the financial overhaul law adopted last year set new standards on releasing information about emergency lending programs and the law required the disclosure in December of much of the data at issue in the cases. (Reporting by James Vicini, Editing by Gerald E. McCormick)

Bonds haven't really moved since Existing Home Sales was released showing a 9.6% decline and the lowest median sales price since 2002. Before that, FNCL 4.5's had already bounced at 101-28 and have been holding a tight range around 101-30. 10yr notes found support just over 3.36 which is very near last week's levels from before the unfolding crisis in Japan. For more information on the Treasury's plan to sell MBS, the following link is a MUST-READ.

*** FEB EXISTING HOME SALES 4.88 MLN UNIT ANNUAL RATE (CONS 5.15 MLN) VS JAN 5.40 MLN (PRV 5.36 MLN)-NAR *** FEB EXISTING HOME SALES -9.6 PCT (CONS -4.0 PCT) VS JAN +3.4 PCT (PREV +2.7 PCT)-NAR *** FEB INVENTORY OF HOMES FOR SALE +3.5 PCT TO 3.488 MLN UNITS, 8.6 MONTHS' SUPPLY-NAR *** FEB NATIONAL MEDIAN PRICE FOR EXISTING HOMES $156,100, -5.2 PCT FROM FEB 2010-NAR *** NAR SAYS 39 PCT OF U.S. FEB EXISTING HOME SALES WERE DISTRESSED SALES, HIGHEST SINCE APRIL 2009, VERSUS 37 PCT IN JAN *** FEB EXISTING HOME SALES MEDIAN PRICE LOWEST SINCE APRIL 2002

Treasury just announced it will begin selling its $142 bln in MBS holdings. FNCL 4.5's lost several ticks immediately on the news (102-06) and treasuries backed up as well. Any lenders who are already out with pricing this morning are at risk of repricing for the worse.

***U.S. TREASURY SAYS WILL SELL UP TO $10 BLN A MONTH OF MBS, DEPENDING ON MARKET CONDITIONS ***- TREASURY SAYS ITS MBS PORTFOLIO MAINLY 30-YR FIXED-RATE SECURITIES GUARANTEED BY EITHER FANNE MAE OR FREDDIE MAC *** - TREASURY OFFICIAL SAYS EXPECTS TO MAKE $15 BLN TO $20 BLN PROFIT ON MBS SALES, DEPENDING UPON MARKET CONDITIONS *** - TREASURY SAYS REASON FOR STARTING SALES NOW IS THAT MBS MARKETS, ECONOMY HAVE IMPROVED SINCE MBS BOUGHT IN 2008-09 *** - TREASURY SAYS MBS SALES NOT RELATED TO DEBT LIMIT, PART OF WINDDOWN OF ASSETS ACQUIRED IN 2008-09 TO STABILIZE ECONOMY

(Reuters) - Engineers managed to rig power cables to all six reactors at the Fukushima complex, 240 km (150 miles) north of Tokyo, and started a water pump at one of them to reverse the overheating that has triggered the world's worst nuclear crisis in 25 years. Some workers were later evacuated from one of the most badly damaged reactors when smoke briefly rose from the site. There was no immediate explanation for the smoke, but authorities had said earlier that pressure was building up at the No. 3 reactor. Smoke was also seen at the No. 2 reactor. The March 11 earthquake and tsunami left more than 21,000 people dead or missing and will cost an already beleaguered economy some $250 billion, making it the world's costliest ever natural disaster. The head of the U.N. atomic agency said the nuclear situation remained very serious but it would be resolved. "I have no doubt that this crisis will be effectively overcome," Yukiya Amano, director general of the International Atomic Energy Agency (IAEA), told an emergency board meeting. "We see a light for getting out of the crisis," a Japanese government official quoted Prime Minister Naoto Kan as saying. But news of progress at the nuclear plant was overshadowed by mounting concern that radioactive particles already released into the atmosphere have contaminated food and water supplies. "Quite clearly it's a serious situation," Peter Cordingley, Manila-based spokesman for the World Health Organization's (WHO) regional office for the Western Pacific, told Reuters in a telephone interview. "It's a lot more serious than anybody thought in the early days when we thought that this kind of problem can be limited to 20 to 30 kilometers ... It's safe to suppose that some contaminated produce got out of the contamination zone." However, he said there was no evidence of contaminated food from Fukushima reaching other countries.

FNCL 4.5's have ticked up another few 32nds this morning, now down only 2 ticks from Friday's close at 102-12. 10yr benchmarks made it back to 3.30, up 3.26 bps from Friday. S&P futures are pointing to a higher open for stocks, but it's that index's stall at 1290 that is helping bonds hold their ground so far this morning.

(Reuters) - Western forces launched a second wave of air strikes on Libya overnight and officials in Tripoli said a missile intended to kill Muammar Gaddafi had destroyed a building in his fortified compound. "It was a barbaric bombing," said government spokesman Mussa Ibrahim, showing pieces of shrapnel that he said came from the missile. "This contradicts American and Western (statements) ... that it is not their target to attack this place." There was no comment on the strike from attacking forces. The first air strikes on Saturday halted the advance of Gaddafi's forces on the rebel-held eastern city of Benghazi and had targeted Libya's air defenses in order to let Western warplanes patrol the skies of this oil-producing north African desert state. The second wave of Western air strikes also hit Gaddafi's troops around Ajdabiyah, a strategic town in the barren, scrub of east Libya that rebels aim to retake and where their fighters said they need more help to take the fight to the enemy. "If we don't get more help from the West, Gaddafi's forces will eat us alive," rebel fighter Nouh Musmari told Reuters. The U.N.-mandated intervention to protect civilians caught up in a one-month-old revolt against Gaddafi drew criticism from Arab League chief Amr Moussa, who questioned the need for a heavy bombardment, which he said had killed many civilians. Moussa said on Monday however that the League respected the U.N. resolution while stressing a need to protect civilians.

The Chicago Fed National Activity Index ticked down to –0.04 in February from –0.01 in January. Three of the four broad categories of indicators that make up the index made positive contributions in February, but for the second consecutive month they were offset by continued weakness in the consumption and housing category.What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity. The indicators are drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories. A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth. The index’s three-month moving average, CFNAI-MA3, increased to +0.11 in February from +0.05 in January, coming in positive for two consecutive months for the first time since April and May of 2010. February’s CFNAI-MA3 suggests that growth in national economic activity was slightly above its historical trend. With regard to inflation, the CFNAI-MA3 indicates limited inflationary pressure from economic activity over the coming year. Employment-related indicators made a contribution of +0.30 to the index in February, up from +0.06 in January. Total nonfarm payroll employment rose by 192,000 in February after increasing by 63,000 in January. Also in February, the unemployment rate edged lower to 8.9 percent, and average weekly initial unemployment insurance claims declined below 400,000 for the first time since June 2008.

FNCL 4.5's are down 5 ticks this morning at 102-09 as more of the Flight-To-Safety bid slowly fades away. That said, benchmarks had been weaker overnight but 10yr yields fell to start the domestic session in line with Friday's highs just over 3.31. They're currently 3.304. Other than the Chicago Fed national activity index, which came in at -0.04 in Feb (vs -0.01 in Jan), the sole data of the morning is New Home Sales at 10:00am.