Recap Of Last Session

• Durable goods weaker than expected, lends to early fixed income strength
• Once again, bonds rallied into a tsy auction and sold off therafter
• 4.5's got as high as PAR, sold off just over half a point and ended the day at 99-24, 2 ticks higher than the open
• Same movement pattern for tsy's with the 10yr ending where it began around 3.66-ranged from 3.63 to 3.73 on the day
• 5yr Note auction was the primary driver of the markets

What's Going On Today

• 10 yr backed up 3 bps from 3.66 to 3.69 overnight as European and Asian markets price in some more caution ahead of today's 7yr note auction.
• Stock lever also in play as nocturnal indexes mostly higher.  Domestic futures slightly positive
• 1^st ticks of the day in MBS come across within a tick of yesterday's last ticks.  For 4.5's that was 99-23
• 10yrs off their O/N (overnight) high yields by a tick or so, hitting the screens at 3.68

On tap:

• Jobless Claims just out while typing
  • Rose to 584k from 559k.  consensus called for 570k.
  • 4 week avg fell from 567k to 559k, lowest since January
  • Continuing claims fell again from 6.25 to 6.197, lowest since April
  • Initial reaction - some selling in bonds, but 10yr not yet through 3.7 and MBS got a baby bounce at 99-19

• record 7yr note auction at 1pm.  More movement potential
• It's "Fed Balance Sheet Thursday" and time for another report on how much MBS the Fed is buying via the fearsome foursome

What You Need To Know

• It's a good week to keep track of where your lenders are pricing vs. MBS prices in order to assess any cautionary hedging going into treasury auctions.
• Though Jobless Claims is an important report, the front row seat to the "What's Moving Markets" convention is reserved for the auction.  In other words, even though we might see some movement this AM after claims are out, the bulk of today's potential positive or negative movement is reserved for the auction.  Could go either way or sideways....

In Case You Didn't Know...

• Federal Reserve's Proposed Changes To Reg Z
  
• Text of the bill regarding YSP and Steering that everyone's been talking about.  Fight With Facts!  Draw your own conclusions!  Discuss them here!  Discuss them there!  Discuss those changes everywhere!

2s vs. 5s: 152bps

2s vs. 10s: 252bps

5s vs. 10s: 100bps

S&P Futures: +11.25 at 986.25

MBS, Tsy, and LIBOR Prices...