So much for bond markets being hesitant to run into the red... 10yr notes are just under 5bps higher on the day at 2.22, Fannie 4.0's are 7 ticks of a point lower at 103-22 and 3.5's are a quarter point lower at 100-27. All this on the heels of a tepid, but not awful Chicago PMI followed by a "beat" on Factory Orders data, not to mention what had already been a recklessly exuberant display of QE3 front-running in equities (ok... maybe not QE3 proper, but at least "stimulus" after yesterday's Fed minutes) as well as a brisk rally in European markets (stimulus expectations there too? After a higher than expected unemployment reading?). Whatever the case, if you had pricing already today, you'll probably soon have a reprice for the worse. Otherwise, delayed (and weaker) rate sheets, but not without potential to bounce back by day's end.

(Reuters) - New orders for U.S. factory goods rose more than expected in July as demand for transportation equipment surged, a government report showed on Wednesday, pointing to some resilience in manufacturing at the start of the third quarter. The Commerce Department said orders for manufactured goods increased 2.4 percent after a revised 0.4 percent fall in June. Economists had forecast orders rising 1.9 percent after a previously reported 0.8 percent fall in June. The Commerce Department report showed orders for transportation equipment jumped 14.8 percent in July, the largest increase since January, as demand for motor vehicles advanced 9.8 percent. That was the biggest gain since January 2003 and suggested that motor vehicle shortages caused by supply chain disruptions following the March earthquake in Japan were easing. Civilian aircraft orders soared 43.4 percent, unwinding the prior month's 24 percent drop. Orders excluding transportation rose 0.9 percent in July after gaining 0.4 percent the prior month. Unfilled orders rose 0.8 percent after climbing 0.3 percent in June, suggesting factories will have to ramp-up production. Shipments increased 1.6 percent after rising 0.6 percent the prior month, while inventories increased 0.5 percent. That was up from June's 0.4 percent increase.

Nothing major so far, unless you count the overnight news that BofA is exiting correspondent lending. The ADP news was a relative non-event and before that, mortgage apps showed a disappointing pull-back in refi volume. Even though stock futures have crested yesterday's best levels, bond markets are still improved due to month end index buying. Quick refresher on that if you need it: a majority of fund managers adjust their allocations based on one of several bond market indexes (Barclays, Merrill, CITI). On the last day of the month, they often need to buy additional securities to keep pace with the index extensions and this can give a small boost to bonds at month end. All "that" is currently helping keep 10yr notes trading around 2.15, and MBS are in the green as well. Fannie 4.0's are up 5 ticks at 104-01 and 3.5's up 5 ticks at 101-04. Ginnie 3.5's are at 102-23. Nice thing about month-end extension buying is that markets expect to see some come in at the end of the day as well, so traders will be hesitant to run bond markets into the red unless there's a VERY convincing reason to do so based on economic data or an unexpected headline. Cruise control by default... Next data starts hitting at 945am with Chicago PMI.

(Reuters) - The pace of U.S. private sector job growth slowed in August for the second month in a row with employers adding 91,000 positions, a report by a payrolls processor showed on Wednesday. Economists surveyed by Reuters had forecast the report would show a gain of 100,000 jobs. July's private payrolls were revised down to an increase of 109,000 from the previously reported 114,000. The report is jointly developed with Macroeconomic Advisers LLC. The ADP figures come ahead of the government's much more comprehensive labor market report on Friday, which includes both public and private sector employment and is forecast to show the economy added 75,000 jobs in August. (Reporting by Leah Schnurr; Editing by Padraic Cassidy)

(Reuters) - Bank of America Corp is looking to sell its correspondent mortgage business and the unit's employees could be notified as soon as Wednesday, the Wall Street Journal said, citing people familiar with the matter. The bank had decided to exit the correspondent channel, which employs more than 1,000 people, because it no longer fits with the long-term strategy for its mortgage unit, the Journal said. Correspondents fund loans and sell them to larger lenders. The bank has used the correspondent channel to build origination volume and make money by re-selling the loans to other parties and then servicing them, the newspaper said. Loans purchased from correspondents accounted for 47 percent of Bank of America's mortgage originations, or $27.4 billion, in the first quarter of 2011, the Journal said citing Inside Mortgage Finance. Bank of America could not immediately be reached by Reuters for comment outside regular U.S. business hours. The biggest U.S. bank plans to cut 3,500 jobs in the next few weeks, its Chief Executive Brian Moynihan had said in a memo to staff on August 18, as it tries to come to grips with $1 trillion of problem home mortgages. (Reporting by Sakthi Prasad in Bangalore; Editing by Vinu Pilakkott)