MBS trading is off to another slow start this morning...so far we are 3/3 on the week in terms of sluggish starts to the session.

Since 5pm "Going Out" Marks....

FN30________________________________

FN 4.0 -------->>>> +0-04  to 100-09  from 100-05

FN 4.5 -------->>>> +0-03  to 101-31  from 101-28

FN 5.0 -------->>>> +0-02  to 102-29  from 102-27

FN 5.5 -------->>>> +0-02  to 103-20  from 103-18

FN 6.0 -------->>>> +0-04  to 104-22  from 104-18

GN30________________________________ 

GN 4.0 -------->>>> +0-04  to 100-12   from 100-08

GN 4.5 -------->>>> +0-03  to 102-06  from 102-03

GN 5.0 -------->>>> +0-02  to 103-17  from 103-15

GN 5.5 -------->>>> +0-02  to 103-29  from 103-27

GN 6.0 -------->>>> +0-05   to 104-17  from 104-12

Before I jump into market flows I want to remind all  that the markets, stock and bond alike, are being driven off of short term/day trading strategies in low volume trading environments. This means you may be left scratching your head, wondering where the fundamentals went...they are not gone just significantly overshadowed by uncertainty.

Vagueness and ambiguity regarding stress tests, Fed participation in the treasury market, $71bn more US debt, prepayment reports, non Farm Payrolls, better than expected economic  indicators, etc, etc....all of which are receiving a speculative spotlight from both bears and bulls. Maybe instead of saying the fundamentals are overshadowed I should say the fundamentals are conflicting with each other. Yeh that sounds a little better...

This mixing bowl of contradictory fundamentals has been the basis for an indecisiveness marketplace. The wide range of expected fundamental outcomes has driven investors to center their strategies on technical biases...by technicals I mean watch your charts and take profits before someone else beats you to it. LOL confused?

Plain and Simple: Conflicting fundamentals have created an indecisiveness marketplace. This uncertainty has forced investors to base their trading decisions on technical indicators (previous price behavior). These strategies have left market watchers perplexed regarding the lack of logical reactions to headline news.

Onto MBS...

Much like the past two sessions mortgage banker selling has been light this morning. In the event that originators decide to lock in more loans today the Fed remains at the ready to easily eat up any excess supply sitting out there for bid. Thus...with the lack of supply MBS is AGAIN outperforming Treasuries (spreads tighter) and the range we pointed out yesterday is still holding up....but trying to break out on the topside!

 The 10 yr Treasury note continues to stick close to the center of its recent range between 3.14 and 3.20. This is a function of the previously discussed technically based posturing and profit taking. Buy on weakness...sell into strength. Not too worry...MBS coupons are mostly ignoring the back and forth mentality being exhibited by their benchmark big brother Treasuries.

Rate sheets are slightly improved today. Much like MBS, rate sheet YSP has been range bound lately. I get to see a wide variety rates from several different pricing conduits across the mortgage pricing supply chain. Your rate sheets are ranging from the aggressively bid FN/FRE cash window to the margin heavy, uber-juiced net branch pricing grids. I see rates as aggressive as 4.25 near par all the way up to 5.25 par quotes. Of course this assumes no LLPAs aka perfect borrower. FYI If you want that super aggressive FN/FRE direct pricing you better be ready to assume the reps and warrants risks....plus have the ability to exploit economies of scale.

In other news...

Mortgage Applications rose 2% in the week ending May 1. Read MND Commentary

ADP Jobs Report was way better than expected...Read MND Commentary

Currently...

UST10YR: 3.1726%

2s/10s: 220.58s

DOW : +18 to 8429

The Treasury Department will auction $22bn 10 yr notes at 1pm....