MBS and Treasuries experienced their best levels of the day as stocks fell from early gains to test unchanged levels on the day. That was good enough for mid 3.41's in benchmark 10's. They're currently at 3.422 as stocks have come off their lows slightly. FNCL 4.5's are near their best levels of the day still, up 6 ticks at 101-28. With no scheduled data today and a relatively quiet session so far in terms of volume and volatility, the stock lever suggests itself as one of only directional indicators available. At current MBS price levels, lenders' rate offerings this morning should be coming out slightly better than Friday afternoon.

FNCL 4.5's are up 6 ticks currently at 101-28, their best levels of the past 2 sessions and around 20 ticks higher than the lowest levels seen Friday. 10yr notes are at their best levels as well with yields 2.84 bps lower at 3.4216. The stock lever is helping bonds push to these fresh lows after stocks opened stronger but have since reversed course to head toward unchanged.

WEST PALM BEACH, Fla., April 4 (Reuters) - U.S. consumers are a lot more cautious about their spending than they were before the recession, Atlanta Federal Reserve Bank President Dennis Lockhart said on Monday. This more subdued approach to spending, even if negative for short-term economic growth is healthy in the long-run, helping address international imbalances characterized by high savings overseas and excess spending at home. "Consumer spending has been growing more slowly relative to income than it did before the recession," Lockhart told an audience of business executives at the Palm Beach Strategic Forum. "I expect that this more measured consumption behavior is likely to persist." In the past, Lockhart has cited such caution as an impediment to the economic expansion. But on Monday he pointed to the advantages of such a shift in behavioral patterns. "A less consumption-dependent economy will help rebalance the country's external accounts," Lockhart said. A similar adjustment is needed -- and already under way -- for a highly indebted U.S. government sector, Lockhart said. "The public sector in the United States must stabilize its finances and reverse the accumulation of debt that has accelerated in recent years," Lockhart said. In Washington, Democrats and Republicans continued to wrangle over the budget and the Congressional debt ceiling, a battle that threatens a shutdown of the federal government. (Reporting by Pedro Nicolaci da Costa; Editing by Andrea Ricci)

The entire week is lighter than last in terms of scheduled economic data. In fact, the most notable piece of the weekly agenda is the prolific speaking schedule of Fed's Lockhart who is with us 4 out of the 5 days. MBS are slightly stronger this morning after finishing at their highs of the day on Friday. FNCL 4.5's are currently up 4 ticks at 101-26 and Benchmark 10yr notes are just over 1 bp lower at 3.436.