MBS continue to improve on above average volume...the yield curve is flattening and TSYs are outperforming MBS (wider spreads). Early in the session originators sold supply of MBS to the TBA market. This goes back to last week when we said we expected this to happen in the near future...well it happend. :-)

FN30_________________________                GN30______________________

FN 4.5 -------->>>> +0-05 to 101-05                    GN 4.5 -------->>>> +0-06 to  101-12

FN 5.0 -------->>>> +0-10  to  102-08                  GN 5.0 -------->>>> +0-07 to  102-13

FN 5.5 -------->>>> +0-04 to  102-18                   GN 5.5 -------->>>> +0-03 to  102-23

FN 6.0 -------->>>> +0-01  to  103-08                  GN 6.0 -------->>>> +0-02  to  103-06

Lender SHOULD be more willing to pass along some gains at this point.

Bernanke has given his testimony to the House Financial Services Committee. Now Barney Frank and his congressional cohorts are probing Ben for more details...(no pun intended)

Here is a link to Bernanke's prepared statement....LINK

Does anyone think the TSY/Federal Reserve purposely planned out "Giethner's Speech" to not provide enough details on the" Financial Stability" plan in order to push money back into bond markets in an effort to lower US Government borrowing costs? Just a thought...

STIMULUS UPDATE: Senators voted 61 to 37 to approve the Obama Stimulus Plan. The Congressional Budget Office says this bill will cost $838 billion over 10 years. Only three Republicans voted in favor of it. In the House, an $819 billion version of the package passed on Jan. 28 with no Republican support.

3-year note auction

High Yield: 1.419%

Bid-to-Cover: 2.67 (Good Demand) vs. last 3-year note auction bid-to-cover of 2.21

Indirect Bids: took almost 45% vs. 28% in last 3 year note auction

Commentary and Analysis to follow...just want to get the news broadcasted for now.