Another day, another directional move to higher prices for MBS and Treasuries. That said, we're only just now getting into positive territory day-over-day with Fannie 3.5's hovering around unchanged (from 102-27 to 102-29) and 10yr yields essentially unchanged at 2.184.

As noted earlier, the stock lever has been much better-connected today versus yesterday and looks to be a factor in current mini-rally for bond markets. Today's weekly petroleum report--of all things--is our current best bet for a quick 4 point drop in S&P's at 10:30am, with distillate and gasoline stocks much lower than expected (less quantity, more demand, higher prices).

Stocks are continuing lower after the initial jolt and we'd expected bond markets to want to follow less and less if the selling continues. The 5yr Note auction is about 2 hours away now, and bond markets likely won't want to get too bullish ahead of it.

Whether or not the current rally affects the potential for positive reprices is questionable. There's an outside chance that lenders who priced very early in the day might consider it, but keep in mind that current levels are merely in line with yesterday's highs. In that sense, if locking loans is on your to-do list, the best bet is to approach things from a "zero to slim chance of negative reprices" perspective and wait for any moves lower in price before locking.

After a fairly lackluster and low volume session overnight, MBS and Treasuries came into the New York session slightly weaker. Opening levels would have left each market roughly in the middle of it's range yesterday with 10's near 2.22 and Fannie 3.5 MBS hitting 102-22.

After a less-than-stellar Durable Goods report, both sides of the market regained some traction but are not looking eager to extend yesterday's rally ahead of this afternoon's 5yr Note Auction. MBS have whipsawed up to 102-29 and are back down to 102-25 at the moment--effectively the lower limit of yesterday's higher trading range (from 10am-close). 10yr yields briefly revisited 2.19's and are back up to 2.2068. To a much greater extent than yesterday, the stock lever is in play were S&P futures have recently clawed back over 5pm levels ahead of the 9:30am 'cash' open.

As noted the only other major piece of data today hits at 1pm with the 5yr Treasury Note Auction. In addition, there's scheduled Fed Twist Buying from 10:15 to 11:00 which always has the potential to move things around a bit. Volume was quite light overnight and continues to be surprisingly light this morning, with reasonable representation from both longs and shorts.

102-25 is a short term pivot for MBS, followed by 102-22 on the downside, and 102-16 if things get ugly. On the upside, 102-30 is a long term pivot and capped yesterday's gains as well. 2.1943 looks like the number to beat as far as TSY yields are concerned with support at 2.22.

*Durable Goods Orders +2.2 vs +3.0 forecast

*Previous month revised to -3.6 from -3.7
*Excluding transportation and defense, as expected
*Nondefense, excluding aircraft, +1.2 pct vs +2.0 pct consensus

New orders for manufactured durable goods in January decreased $8.6 billion or 4.0 percent to $206.1 billion, the U.S. Census Bureau announced today. This decrease, down following three consecutive monthly increases, followed a 3.2 percent December increase. Excluding transportation, new orders decreased 3.2 percent. Excluding defense, new orders decreased 4.5 percent.

Transportation equipment, down following two consecutive monthly increases, had the largest decrease, $3.6 billion or 6.1 percent to $55.2 billion. This was due to nondefense aircraft and parts, which decreased $3.8 billion.