10yr notes continue to hold a tight range between 3.28 and 3.297 this morning despite various headlines and economic data. MBS have closed a bit of the gap in terms of their previously lag vs treasuries. FNCL 4.5's are up 6 ticks on the day now at 102-03. First rate sheets of the day are coming in slightly improved versus yesterday.

(NEW YORK TIMES) — A small device exploded outside Jerusalem’s central bus station on Wednesday, leaving at least 12 injured, according to Israeli emergency services. The Israeli daily Haaretz reported that the bomb was strapped to a telephone poll near the stop, located outside the International Convention Center and across from the central bus station. Local news media reported that there was no sign of a body at the scene to indicate a suicide attack. The explosion did not appear to be large enough to destroy nearby buses though it did blow out windows. Television images showed people carried away in stretchers. “I heard the explosion in the bus stop,” Meir Hagid, a bus driver who was driving through the station when the blast occurred, told The Associated Press. He said nobody in his bus was hurt. The explosion came amid rising tensions between Hamas and Israel, and appeared to be the first attack to strike inside Israel in some time.

*** FEB SINGLE-FAMILY HOME SALES RECORD LOW 250,000 UNIT ANN. RATE (CONS 290,000) VS JAN 301,000 (PREV 284,000) *** FEB SINGLE-FAMILY HOME SALES -16.9 PCT VS JAN -9.6 PCT (PREV -12.6 PCT) *** FEB HOME SALES NORTHEAST -57.1 PCT, MIDWEST -27.5 PCT, SOUTH -6.3 PCT, WEST -14.7 PCT *** FEB NEW HOME SUPPLY 8.9 MONTHS' WORTH AT CURRENT PACE VS JAN 7.4 MONTHS *** FEB MEDIAN SALE PRICE $202,100, -8.9 PCT FROM FEB 2010 ($221,900) *** HOMES FOR SALE AT END OF FEB 186,000 UNITS VS JAN 186,000 UNITS *** FEB MEDIAN SALE PRICE LOWEST SINCE DEC 2003 ($196,000)

With a small amount of latent uncertainty surrounding Treasury's MBS liquidation, TBA demand is lagging a bit as seasoned/specified pools see a relative increase in demand. Seems logical to us. Effects of such shifts are evident in the charts this morning. Notice 10yr notes' unwavering adherence to the 3.297 pivot, acting as support this morning. In contrast, note MBS break below their analogous support line. There's no immediate rate-sheet implications for this relative weakness, just a point of curiosity. FNCL 4.5's are up 4 ticks on the day at 102-01.

(Reuters) - A European Union deal to boost the euro zone's rescue fund will not save Portugal from financial market pressure to seek a bailout and might only buy time for Spain as it strives to avoid becoming the next target. The European Council meets on Thursday and Friday to sign off on what has been billed a 'comprehensive solution' to the crisis that has crippled the fundraising capability of euro zone countries running high deficits and financing large debt piles. But analysts said the measures set to be finalised, having been agreed in principle earlier this month, contain little to stem the tide of bond market pressure threatening to sweep Portugal into a bailout, and could turn market focus on Spain. "There is no silver bullet coming out of Brussels... there's nothing in what has been agreed over the last few weeks which really changes the picture for Portugal," said Deutsche Bank economist Gilles Moec. Adding to pressure on Lisbon, a vote scheduled for late Wednesday on fresh austerity measures aimed at reassuring markets threatens to topple Portugal's minority government. The key points of the bailout fund reforms are a commitment to increase the effective lending capacity of the facility to 440 billion euros and, under special circumstances, to allow the fund to buy government bonds at auction. Neither addresses the eye-watering cost of funding Portugal's debt burden. For this reason, many have already written off its chances of avoiding a bailout

(Reuters) - Yemen opposition groups called on protesters to march on President Ali Abdullah Saleh's Sanaa palace on Friday to force him out, hoping to end a crisis his allies abroad fear will benefit Islamic militants. "Friday will be the 'Friday of the March Forward', with hundreds of thousands of people...We will arrive where you are and we will remove you," opposition spokesman Mohamed Qahtan told Al Jazeera on Wednesday, addressing the Yemeni leader. Seven weeks of street protests against Saleh's 32-year rule of the impoverished Arabian Peninsula state has raised alarm in Western capitals at the prospect of a country where al Qaeda has entrenched itself falling apart. Yemen borders the world's biggest oil exporter, Saudi Arabia, and major shipping routes. Al Qaeda cells in Yemen have in the past two years attempted attacks outside Yemeni soil in Saudi Arabia and the United States. A succession to Saleh is unclear and the country faces the danger of fragmentation.

(Reuters) - Syrian forces killed at least six people on Wednesday in an attack on a mosque in the southern city of Deraa, site of unprecedented protests challenging President Bashar al-Assad's Baathist rule, residents said. Assad, a close ally of Iran, key player in neighboring Lebanon and supporter of militant groups opposed to Israel, has dismissed rising demands for fundamental reform in Syria where his Baath Party has held a monopoly on power for 48 years. Those killed included Ali Ghassab al-Mahamid, a doctor from a prominent Deraa family who went to the Omari mosque in the city's old quarter to help victims of the attack, which occurred just after midnight, said the residents, declining to be named. YouTube footage showed what purported to be the street in front of the mosque before the attack, with the sound of gunfire audible and a person inside the mosque grounds yelling: "Brother don't shoot. This country is big enough for me and you." Before security forces attacked the mosque, the focal point of the Deraa protests, electricity was cut off and telephone services were severed. Cries of "Allah Akbar (God is the greatest)" erupted across neighborhoods as the shooting began. "Syrian authorities think they can kill non-violent democratic protesters with impunity," exiled Syrian rights defender Haitham al-Manna told BBC television from Paris. An official Syrian statement said: "Outside parties are transmitting lies about the situation in Deraa," blaming what it described as armed gangs for the violence

(Reuters) - Western warplanes silenced Muammar Gaddafi's artillery and tanks besieging rebel-held Misrata in western Libya on Wednesday after a U.S. admiral warned his armor was the next target. Breathing defiance, Gaddafi earlier said Western powers who carried out a fourth night of air strikes on Libya to protect civilians under a U.N. mandate were "a bunch of fascists who will end up in the dustbin of history." Gaddafi's tanks had kept up the shelling of Misrata, killing dozens of people this week, and residents said a "massacre" was taking place with doctors forced to treat the wounded in hospital corridors. Snipers fired at people from rooftops. "We will not surrender," Gaddafi had told supporters forming a human shield to protect him at his Tripoli compound, which came under attack in 1986 from the U.S. Reagan administration and once again in the current round of air strikes. "We will defeat them by any means ... We are ready for the fight, whether it will be a short or a long one ... We will be victorious in the end," he said in a live television broadcast, his first public appearance since the air strikes began.

(Reuters) - Japan estimated the cost of the damage from its devastating earthquake and tsunami could top $300 billion as authorities in Tokyo warned that babies should not be given tap water because of radiation from a crippled nuclear plant. The first official estimate since the March 11 disaster covers damage to roads, homes, factories and infrastructure, and dwarfs losses from both the 1995 Kobe quake and Hurricane Katrina that swept through New Orleans in 2005, making it the world's costliest natural disaster. As concern grew over the risk to food safety of radiation from the damaged Fukushima power plant, 250 km (150 miles) north of the Japanese capital, the United States became the first nation to block some food imports from the disaster zone. Tokyo authorities said on Wednesday that water at a purification plant for the capital of 13 million people had 210 becquerels of radioactive iodine -- more than twice the safety level for infants. Tokyo Governor Shintaro Ishihara, however, said that level posed no immediate risk and water could still be used. "But, for infants under age one, I would like them to refrain from using tap water to dilute baby formula," he added.

Unlike some of the recent strength in bonds that has been chalked up to "flight-to-safety" buying, the overnight strength is mild by comparison. The evolving story of the costs that will be required to rebuild Japan, and news of elevated iodine levels in Tokyo tap water as well black smoke rising from Fukushima reactor #4 all helped to fuel the FTS. The uncertainty surrounding the situation in Libya contributed. FNCL 4.5's are up 5 ticks at 102-02 and should result in some gains in this morning's rate sheets. There is limited econ data on the calendar, but we'll get New Home Sales at 10am and then Bernanke at noon.