Today was fairly lifeless on all fronts. No data, and no meaningful trading action on this largely sideways Monday. The first of this week's Treasury Note Auctions hits tomorrow with the 1pm release of the 2yr Note results. Before that, New Home Sales is the sole piece of economic data at 2pm. For a look at the consensus estimate on that as well as the rest of the week's data, see the following link:

Effective immediately, we are suspending PMI Mortgage Insurance Co. (PMI), and its wholly-owned subsidiaries including, PMI Insurance Co. and PMI Mortgage Assurance Co. (collectively “PMI”), as approved mortgage insurers. With this suspension, mortgages insured by PMI with note dates before May 19, 2011, or after September 16, 2011, will no longer be eligible for sale to Freddie Mac. To help manage your pipeline, mortgages insured by PMI with note dates on or after May 19, 2011, and on or before September 16, 2011, must be delivered to Freddie Mac on or before December 30, 2011, whether for borrower-paid or lender-paid insurance.

(Reuters) - A measure of business activity sank in July from June, though it rose slightly from a year ago, as economic and regulatory uncertainties kept many corporations from new spending, a lender group said on Monday. U.S. businesses originated $5.7 billion in loans, leases and lines of credit in July, 2 percent more than a year ago but 22 percent less than in June, the Equipment Leasing and Finance Association (ELFA) said. "Anecdotally, all of the business we're seeing is in the replacement world, it's not in the expansion world," ELFA Chief Executive William Sutton said. Many businesses were hesitant to spend on new equipment amid chaotic congressional debate over deficit reduction and tax reform, uncertain global economic trends and turbulent financial markets, he noted. "We are seeing a slow but plodding recovery," Sutton added. Demand for loans for investment in everything from industrial equipment to computer systems and office furniture has risen 24 percent so far this year versus the same period a year ago, But 36 percent of responding companies said their volume has declined. "All aspects of the economy -- everything from healthcare to construction, transportation, IT -- all of the different areas that our members finance equipment for, see all uneven activity," Sutton said. ELFA represents lenders who finance half of the capital investment in the United States each year. The group reports economic activity for the $521 billion equipment finance sector. (Reporting by Lynn Adler, editing by Matthew Lewis)

Barring the unforeseen, MBS-watching activities are probably at moot point for the rest of the day. With one brief exception, the trading range never got any wider than an eighth of a point today and has been slightly narrower into the afternoon. After some morning disconnection, the stock lever hooked back up and Treasury yields proceeded to play ping pong with stocks on a table of ever-decreasing length. Yes, gone are those heady morning hours where we saw 10yr yields move from 2.13 to 2.08. 5bp swings are a thinkg of the past as recent highs and lows aren't even 1bp apart. Stocks too... Lower highs and higher lows.... There's no news, no volume, no directionality, and apart from "staying safe," there wouldn't even be a reason to keep watching markets on a day like today. There's a collective "sigh" of resignation scheduled for 3pm. Join us, won't you?! Take a moment to place your hand to the side of your head, roll your eyes, and exhale audibly. Maybe that will be the sort of defiance markets need to do something exciting (if you're in to that sort of thing... we are.)

Reuters) - Prosecutors on Monday appeared set to drop sexual assault charges against former IMF director Dominique Strauss-Kahn, a stunning reversal in the case against a man who many had seen as the next president of France. The Manhattan District Attorney's office will recommend to a judge that the case be dismissed after they lost faith in the accuser, a 32-year-old hotel maid from Guinea, due to lies she told about her past, New York news media reported. Prosecutors were to meet with the maid, Nafissatou Diallo, and her lawyer at 3 p.m. (1900 GMT) on Monday to discuss the case ahead of a court hearing on Tuesday. Strauss-Kahn, who has strongly denied the allegations, was the leading contender for the April 2012 presidential elections until Diallo accused him of attempted rape and forcing her to perform oral sex on May 14 in his luxury Sofitel Hotel suite near Times Square. Strauss-Kahn, 62, was marched from a first-class cabin of an Air France plane, which was to take him to meetings in Europe on the sovereign debt crisis, to face the charges. After a night in custody, he was paraded unshaven before the media at the Manhattan courthouse in a "perp" walk, a scene that enraged many in France who viewed it as tantamount to convicting a man who had yet to be charged with any crime.

This alert is to unwind the previous positive alert which spoke of weakening stocks and rallying bonds. The opposite is now the case as S&P's are back up to their first lows of the morning at 1135 and 10yr yields at their early AM lows at 2.11. MBS are generally weathering the mild storm that is this morning's volatility better than other parts of the market. Fannie 4.0s are still over their 104-00 lows of the day, currently at 104-03 while 3.5's are at 101-03. We wouldn't necessarily say there is a marked risk of reprices for the worse here, but the last hour of trading is moving in that direction whereas the previous hour moved towards reprices for the better. Don't take anything for granted about the immediate future. Stocks and Treasury yields could use current levels as a pivot point and bounce back lower, or those pivots could be broken and we head toward the weaker levels of the day. Things are choppy within this narrow range.

If current trends continue, reprices for the better are possible. MBS have been trending up all morning and 10yr yields are currently under the 2.10 pivot at 2.095. The current rally in bond markets as well as the prospects for reprices for the better seem hinged on stock market weakness. S&P's are currently in line with their lowest lows from Friday at 1123. If that reverses quickly, so could the MBS rally. 3.5's are at 101-15 and 4.0's are at 104-06.

Last week's overall origination in MBS was about 3/4ths the previous week-- roughly 7.5 bln last week vs roughly 10 bln in the previous week. Fannie 4.0's account for just over a quarter of last week's production. There's a two way tie for 2nd place with Ginnie2 4.0's and Fannie 3.0 15yr coupons each in at about 750 mln. Ginnie 3.5's accounted for about 200 mln. The biggest contrast between 3.5 and 4.0 coupons was seen in Fannie/Freddie MBS where 3.5's only BARELY cracked the 100 mln mark last week. That's a pretty steep discrepancy, but one which should continue to get less steep. More supply is expected to hit this week if it looks like rates are set to move higher (think of it like "short-selling"). 3.5 coupon market share is in a grey area of being able to increase more rapidly with prices closer than 2-26 to 4.0's. At 101-14 on 3.5's currently and 104-07 on 4.0's, the spread is currently 2-25.

Fannie 4.0's are 1/32nd away from breaking even on the day at 104-06. Fannie 3.5's are down only 3 ticks on the day at 101-11. The bigger rally is happening in Treasuries as 10yr yields are down to 2.097 on a fairly healthy sell-off in stocks. The S&P is now at 1128, below Friday's high volume marks at 1140. It seems like stocks should try to find a bottom near Friday's low range here in the mid/high 1120's. If that turns out to be the case, 10yr yields could have a tough time breaking 2.10, which acted as a ceiling last week and now looks like it might be a floor this week.