Next week's focus returns to economic data. What had been uncertainty over today's Jackson Hole will be a different sort of uncertainty over next Friday's NFP (yes, it's that time already). It could combine with the 1% GDP we just got to make things look decidedly more "double dippy" or it could ease those concerns (or likelihoods depending on who you talk to). But the first four days of the week are no slouches either. Monday has Personal Consumption Expenditures and Pending Home Sales hit Monday and things only get busier from there with FOMC minutes (minutes from the 3 dissenting voter meeting!) and Consumer Confidence on Tuesday, a slew of mid-tier economic data on Wednesday's official "month-end," and ISM Manufacturing (and the beginning of September) on Thursday.

10yr yields and MBS alike continue to be technically gorgeous. Each time a break higher in yield has threatened 10yr notes, they've bounced in brilliantly linear and technical fashion. For 4.0's as well, the support mentioned earlier at 103-25 just got another bounce and the descending "lower highs" are quite linear as well. But a few lenders just repriced for the worse. If we were trying hard to read something into this, we might point out that the only coupon that justified any concern was 3.5's, and that might be early confirmation of the 3.5 coupon shift, but that's pushing it. More likely than not, reprices would be limited to aggressively priced lenders who were concerned by the a move weaker in the bond market that was relatively sharper than recent trading. That concern could be coinciding with the need for pipeline control on today's excellent rate sheet offerings as well. And it's that latter point that concerns us heading into the rest of the day. Markets do not justify reprices for the worse, but without markets rallying, pipeline control could be a logical choice for a few more lenders. 4.0's are currently at 103-28 and 3.5's at 101-01. 10yr yields are down to 2.1899 after a recent high of 2.206.

Quite a fascinating little display by MBS this afternoon... We mentioned 2.22 earlier in 10yr notes and it seems that MBS are on the edge of their seat watching that level. Each time 10's approach, MBS weaken in line with lows of the day (caveat: "lows of the day" will refer to the MODE, factoring out the one huge swing just before 10:30). Then as 10yr yields bounce off the 2.22 ceiling, MBS tick up quickly, both in 3.5's and 4.0's (at current levels, it's only a matter of time and a September MBS settlement before 3.5's dominate, so we're paying more attention than we have been today). Bottom line is that 3.5's seem predisposed to hold near or above 101-00 and 4.0's to 103-25. 4.0's will actually look stronger right now due to the UIC preference into the afternoon. Chalk that up to a market that's increasingly skeptical about gov-refi-program-induced payoff threats to higher coupons. (while we do hope that makes sense, we realize it might not. Please let us know so we can go into greater detail if necessary). 4.0's are at 103-30, nearer the high side of their range, while 3.5's are towards the middle to lower end of theirs, currently at 101-01. Still, it looks good enough for a reprice for the better from any lenders that were priced conservatively this morning, but that doesn't become flat-out "likely" unless we get a cue that bonds are shifting from "sideways and contained" to "bullish." That would probably look like a break of 2.18 in 10yr yields as an early indication.

Bond markets have been doing their best to try and call the shots today versus a more volatile stock market reaction. 10yr yields have put in support bounces that have done a good job so far of forcing stocks to hit resistance ceilings. 10's just bounced at 2.22 for the 2nd time today, and although they're heading lower (2.204) S&P's keep hitting higher highs, currently at 1169.16. Each time 10's bounce around the 2.22 level, MBS get a second wind instead of falling through opening levels. Fannie 4.0's are currently at 103-27 and 3.5's are at 101-02. Rate sheets have been quite a bit better than yesterday in some cases, so we'd like them to stay that way. To that end, we'd like opening levels to hold. Let's say 103-23/24. A prolonged dip below there could mean risks of reprices for the worse. A precursor to MBS strength into the afternoon would have to be 10yr notes breaking lower in yield past an ascending trendline that has marked higher and higher lows since 10:34am. It bounced at 2.17, 2.19 and 2.20 from 10:34, to 11am, and 11:20am. Getting lower than that with decent volume would be good. Breaking higher than 2.22 would be bad.