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In stark contrast to the week just passed, next week has no auction supply and quite a light schedule of economic data. All you'll get Monday is breakfast with Dennis Lockhart and a bedtime story from Uncle Ben. Those two fed speakers allude to the one commonality between this week and last: TONS of Fed speakers, particularly Lockhart... He's with you again on Tuesday morning, but this time followed by some data at 10:00am with the ISM Non-Mfg Index. Then, it's more Fed speakers (Kocherlakota and Plosser in the early afternoon) before the 2pm release of the FOMC Minutes. Wednesday is light on data again, but guess who's coming for breakfast! Denny Lock! Thursday looks like the busiest day of the week, but seeing as how your morning will only be graced by Fed's Lacker, we think the lone data point of 830am Jobless Claims is little consolation for enduring a breakfast without our precious Dennis.... Oh, and of course, what off-cycle Thursday would be complete without a new supply announcement and the standard issue Fed Balance Sheet/Money Supply? On Friday, Wholesale Trade stands alone in the 10:00am econ slot, and THANKFULLY, the nature of the human experience once again becomes understandable as our hearts are once again locked down by the man, the myth, the legend: Lockhart!

Can you hear it now? Drip, drip, drip... It's not only the descriptive word we've been using to relate the steady ongoing factoids of the economic recovery making life tough for mortgage rates, but this afternoon, it will also apply to lenders who, one by one, turn the spigots of ysp ever-so-slightly, but enough to see a steady trickle of reprices for the better. Volume and volatility continue to die down and FNCL 4.5's are at their highs of the day at 101-22. We wish this provided any sort of guidance about where MBS might be on Monday and into the future, but all we got for you right now is this damn leaky faucet.

Across the MBS stack and the yield curve alike, there are SMALL numbers in both red and green indicating only minute changes for the better and worse. After falling on the Employment Situation Report, we now have a bond market that has rallied back admirably. Since first rates today were released during weaker trading, it's no surprise that we see reprices for the better, but the Rally leaves MBS squarely on 101-20, a level that 4.5's are not likely to stray away from by a large margin for the rest of the day. Even if prices do move higher or lower from here, it would need to happen with big volume in order to be significant. So while it's a victory to have gotten back to even on the day, it's frustrating that the big-picture tendencies remain unresolved.

10yr yields have dropped for a 3rd time now to test it's best levels of the day in the mid 3.46's. This has been stalwart in its resistance to further gains, but a break lower isn't out of the question as stocks stagnate sideways. MBS are still in their consolidating trend pattern as well, and a break for 10yr notes will probably coincide with a break to the upside for MBS, drawing the lenders who haven't repriced for the better yet off the sidelines for a bit of afternoon delight (for rate sheets!).

The previously mentioned trend channel got a friendly bounce at 11:23am off 101-14 and is currently at 101-19 in FNCL 4.5's. But now, that trend is colliding with the key pivot point at 101-20 and so far has been unsuccessful in extending gains. This coincides with the 3.46's in 10yr notes, which mostly supported yields against further losses yesterday, and is capping them from further gains today. Both these technicals would need to give way if bonds are to advance. That may seem like common sense, but the point is that IF these levels break, it's a positive indication for an ongoing rally as opposed to just a random price movement.

Looking at the FNCL 4.5 chart so far today, we can see that a series of higher lows and higher highs are perfectly parallel, forming a trend channel. With prices currently at 101-15, they are on the exact lower edge of that trend channel and at risk of breaking this uptrend unless they bounce here. This could reduce the chance of reprices for the better.

*** 07:50 - FED'S DUDLEY SAYS RECOVERY NOT LOOKING AS GOOD AS ABOUT A MONTH AGO *** 07:50 - FED'S DUDLEY SAYS JOBS GROWTH ENCOURAGING, BUT DON'T WANT TO OVERSTATE HOW FAR WE HAVE COME *** 07:53 - FED'S DUDLEY SAYS COMMODITY PRICE PRESSURES HAVE VIRTUALLY NOTHING TO DO WITH US MONETARY POLICY *** 07:54 - FED'S DUDLEY INFLATION EXPECTATIONS STILL SEEM TO BE WELL-ANCHORED, WAGES SUBDUED *** 07:55 - FED'S DUDLEY-QE2 HAS PROVEN TO BE A GOOD POLICY, SEE NO REASON TO PULL BACK FROM THAT YET *** 07:55 - FED'S DUDLEY-WE HAVE ABILITY TO EXIT, TOO SOON TO TALK ABOUT HOW