Volume and Volatility were both lower than normal today for MBS.  At least MBS did make some gains today.  Furthermore, we had discussed the possibility of treasuries staying relatively unchanged on the day with MBS rallying slightly, thus tightening spreads.  This was the case to a small extent today as MBS were up 3-8 ticks while tsy's were indeed relatively unchanged.  Here are today's charts and tables:

FN30________________________________

FN 4.0 -------->>>> +0-08  to 100-01  from 99-25

FN 4.5 -------->>>> +0-06  to 101-24  from 101-18

FN 5.0 -------->>>> +0-04  to 102-24  from 102-20

FN 5.5 -------->>>> +0-03  to 103-17  from 103-14

FN 6.0 -------->>>> +0-03   to 104-18  from 104-15

GN30________________________________ 

GN 4.0 -------->>>> +0-08  to 100-03  from 99-27

GN 4.5 -------->>>> +0-05  to 101-31  from 101-26

GN 5.0 -------->>>> +0-03  to 103-11  from 103-08

GN 5.5 -------->>>> +0-02  to 103-25  from 103-23

GN 6.0 -------->>>> +0-04  to 104-12   from 104-08

In part, contributing to the positive price action today was a pull back in the recently robust originator selling figures.  The supply that did make it to the market today was readily absorbed by your favorite buyer and mine: the Fed.  There is also a buzz in the trading community that this trend of decreased originator supply will continue in the near term.  This means that if our baseline treasury's can stay relatively unchanged, MBS and thus rates should also stay at least unchanged to potentially better.  Sound familiar?  The confidence of that assumption of course is based on the Fed's participation and assumes their 1.25 trillion in scheduled buying remains unaltered.  It shouldn't, but it would be a bit of a dilemma for them to "force" bid side money into a system without enough supply.  MBS would be driven to all time highs again and a similar set of problems that plagued us in January might resurface.

Combine this with the fact that other account types have actually exhibited a pulse of late and the supply and demand picture for MBS continues to look very strong.  For today at least, it was mostly the Fed, as other domestic account's participation were limited and Asia was out on holiday.

There were gains as well in the equity complex with the Dow up 214 to 8427.  This has been a not-uncommon occurrence: money comes out of the market on Friday's and back in on Monday's allowing us to see the once uncommon phenomenon of a joint gain by MBS and stocks.  I wonder if the back to back earth-shattering weekend events in late 2008 have investors not wanting as many open positions over weekends anymore?  A bit of a joke there, but a bit serious as well.  Today at least is a bit more understandable by way of specific causality.  First of all, Friday and indeed the whole week was not so hot for Tsy's.  Their momentum likely carried to the extreme, it was a distinct possibility that they could fight off that "selling urge" normally precipitated by stock rallies.  And although that doesn't account for MBS, the supply story does, not to mention we've been taking cues from tsy's moreso than normal.  This isn't to say we move in the same proportion every day, but our directionality has certainly been suggested by theirs only with a bit more recalcitrance in either direction.  In other words, the leash is tightly fastened at the collar, but with plenty of slack between there and the hand.  Boundaries of the esoteric being reached, let's move back into some more normal discussion.

Aside from what AQ has already discussed today with respect to scheduled data and headlines, we also had the latest Senior Loan Officer Survey.  Today's report noted a "somewhat larger fraction of domestic respondents" reporting a SUBJECTIVE tightening in lending standards.

 The data also noted that the relative demand for conforming loans has been increasing over the last 3 months.  What a shocker!

As far as tomorrow, the headline event will be Bernanke's testimony on the Economic Outlook before the Joint Economic Committee at 10AM Eastern.  At the same time, ISM non-mfg numbers hit, with the consensus calling for 42.0 versus the 40.8 in March.  If equities were looking for a reason to sell off, a greater than expected level of austerity by Dr. Ben combined with a retracing in the ISM number as opposed to an advancement might just do the trick.  Then at 1pm, the treasury's quarterly refunding auctionskicks off with $35 billion in 3 yr notes.  At 1:15 stern Stern of Minneapolis provides the first of the three remaining fed-speaks with Boston's Rosengren pitching relief at 645pm from Hong Kong.  Then Yellin' Yellen coming in for the 9th inning save at 830pm from Berkeley.  For the record, yes, I too think baseball is only fun to play, but boring to watch.

So play we shall.  We're still close enough to the long term floor that floating is reasonably safe barring any lender giveaways.  Do, however, stay tuned on an intraday basis as this default position may be ammended at a moment's notice.  Although it's not quite as potent as the long term floor at 99-19, 4.0's reached the PAR level today and if they can overcome the substantial gravity surrounding that number, it may be time to look at another strategic round of locks assuming, of course, that lenders aren't "watching" the game either and actually decide to "play ball."