It would seem that traders or algorithms (or both) are either cognizant of the 200-day moving average at 2.255 or at least have coincidentally traded it as resistance so far this morning. Just after 8am, just after 9:30, and just after 10:30, we have three noticeable bounces, followed by our first test lower heading into the 11am hour.

Just as we're hypothesizing about cognizance of that moving average, so too should we be cognizant of the impending completion of the Fed's scheduled Twist buying in the 2022-2030 maturity range as something that could cause a bit of volatility in coming minutes.

MBS are near their highs of the day with Fannie 3.5's up 7 ticks at 102-15. If the reaction to the Fed buying helps 10's break lower, we'd likely see MBS hit new highs.

Over the first three days of the week, Conventional 30yr Fixed Rates averaged 4.08% and 15yr Fixed 3.30%. Last week's averages were 3.92% and 3.16% respectively.

Freddie Mac's Primary Mortgage Market Survey® (PMMS®) surveys lenders each week on the rates and points for their most popular 30-year fixed-rate, 15-year fixed-rate, 5/1 hybrid amortizing adjustable-rate, and 1-year amortizing adjustable-rate mortgage products. The survey is based on first-lien prime conventional conforming mortgages with a loan-to-value of 80 percent. In addition, the adjustable-rate mortgage (ARM) products are indexed to U.S. Treasury yields and lenders are asked for both the initial coupon rate and points as well as the margin on the ARM products.

The survey is collected from Monday through Wednesday and the results are posted on Thursdays. Average rates and points (and margin for ARMs) for each product are reported for the nation and the five Freddie Mac regions.

* LEI +0.7 vs Consensus +0.6 and Last Month +0.2

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.7 percent in February to 95.5 (2004 = 100), following a 0.2 percent increase in January and a 0.5 percent increase in December.

Said Ataman Ozyildirim, economist at The Conference Board: “Continued broad-based gains in the LEI for the United States confirm a more positive outlook for general economic activity in the first half of 2012, although still subdued consumer expectations and the purchasing managers’ index for new orders held the LEI back in February. The CEI for the United States, a measure of current economic conditions, has also been rising as employment, income, and sales data all continue to improve. Industrial production, however, has not yet picked up strongly.”

Added Ken Goldstein, economist at The Conference Board: “Recent data reflect an economy that improved this winter. To be sure, an unseasonably mild winter has contributed to many of the recent positive economic reports. But the consistent signal for the leading series suggests that progress on jobs, output, and incomes may continue through the summer months, if not beyond.”

U.S. house prices were unchanged on a seasonally adjusted basis from December to January, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.7 percent increase in December was revised downward to reflect a 0.1 percent increase. For the 12 months ending in January, U.S. prices fell 0.8 percent. The U.S. index is 19.2 percent below its April 2007 peak and roughly the same as the February 2004 index level.

The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine census divisions, seasonally adjusted monthly price changes from December to January ranged from -1.7 percent in the West South Central division to +4.7 percent in the West North Central division.

The overnight session was largely positive for bond markets. 10yr yields traded down under 2.25 briefly and MBS opened up 9 ticks at 102-17. As we opined it was likely to do in "The Day Ahead," a Jobless Claims number under 350k put some pressure on bonds, bringing MBS and 10's closer to breaking even on the day.

The fact that we've seen technical support at a pivot point with yesterday's strongest levels is very much in line with our thesis for the day (and week): Technicals and Tradeflows trump scheduled data unless scheduled data speaks VERY loudly. Here's a bit more from The Day Ahead to flesh out this view point:

Today's calendar offers a seemingly endless supply of data, but apart from a few of the events, everything falls into the category of "would need to deviate greatly from estimates to move markets much." The data will provide some guidance though, just as Existing Home Sales provided some guidance yesterday. But we're a bit surprised to see how universally that data is credited with yesterday's rally. Would the price action have moved equally in the opposite direction had Home Sales beaten consensus by the same amount it missed? Not likely, but no way to know for sure.

Our sense is that poker faces are well-rehearsed for this back-up in rates. Even the players who think the sell-off's overdone won't be keen to show that sentiment to the rest of the players until they can see that they'll play it the same way. In short, the players at the table are trying to get a sense as to whether or not Monday's run to 2.399 was the bounce off 2.40 (technically 2.42) that everyone seems to be expecting.

*Claims down to 348k vs 354k consensus
*previous week revised from 351k to 353k
*4 week moving average from 355.75k to 355k
* claims lowest since Feb 2008

In the week ending March 17, the advance figure for seasonally adjusted initial claims was 348,000, a decrease of 5,000 from the previous week's revised figure of 353,000. The 4-week moving average was 355,000, a decrease of 1,250 from the previous week's revised average of 356,250.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending March 10, a decrease of 0.1 percentage point from the prior week's revised rate of 2.7 percent.

The advance number for seasonally adjusted insured unemployment during the week ending March 10 was 3,352,000, a decrease of 9,000 from the preceding week's revised level of 3,361,000. The 4-week moving average was 3,385,750, a decrease of 13,000 from the preceding week's revised average of 3,398,750.