10yr yields fell all the way to AM lows at 3.36, but have since ticked just slightly higher. So 3.36 to 3.42 marks the range in 10yr Treasuries this morning. Those 6 bps in yields would normally coincide with a significantly wider range than the THREE TICKS (!) we've seen in 4.5's (102-10 to 102-13). Granted, there is a bit more movement down in coupon, but not much seems to be inspiring 4.5's to much of anything. Low volume phenomenon, and we can continue to watch the outer limits of the treasury range for potential early indication.

After yields in the 10yr benchmark moved up through their weakest levels of the morning, the last line of defense from a technical standpoint, was just under 3.42. Following 10am Econ data, 3.42 provided a good support bounce and 10's have moved back into the 3.38's currently. MBS have firmed up a bit as a result, with 4.0's at 99-03 and 4.5's at 102-12. The volume that does exist has greatly favored treasuries so far this AM, so expect MBS price action to continue to be sparse by comparison.

Total: 810bil vs previous 802bil. Private Non-Residential - $256bil versus $252bil previous. Private residential - $235bil vs $229bil Previous. Public Spending - $318bil vs $320bil previous. To see how these numbers compare to previous month, and for a chart of their ongoing changes, visit: http://www.mortgagenewsdaily.com/data/housing-construction-spending.aspx

Today 07:00 - US NOV CONSTRUCTION SPENDING +0.4 PCT (CONSENSUS +0.2 PCT) TO $810.2 BLN VS OCT +0.7 PCT (PREV +0.7 PCT) Today 07:00 - US NOV PRIVATE CONSTRUCTION SPENDING +0.3 PCT, PUBLIC SPENDING +0.7 PCT Today 07:00 - US NOV CONSTRUCTION SPENDING LEVEL HIGHEST SINCE JUNE ($820.2 BLN)

Today 07:00 - ISM U.S. MANUFACTURING PRICES PAID INDEX 72.5 IN DECEMBER (CONSENSUS 70.4) VS 69.5 IN NOV Today 07:00 - ISM REPORT ON U.S. MANUFACTURING SHOWS PMI AT 57.0 IN DECEMBER (CONSENSUS 57.0) VS 56.6 IN NOV Today 07:01 - ISM U.S. MANUFACTURING EMPLOYMENT INDEX 55.7 IN DECEMBER VS 57.5 IN NOVEMBER Today 07:01 - ISM U.S. MANUFACTURING NEW ORDERS INDEX 60.9 IN DECEMBER VS 56.6 IN NOVEMBER Today 07:02 - ISM U.S. MANUFACTURING ACTIVITY INDEX AND PRICES PAID INDEX AT HIGHEST SINCE MAY 2010 Today 07:03 - ISM U.S. MANUFACTURING EMPLOYMENT INDEX AT LOWEST SINCE MARCH 2010

Before we begin any dialogue on movements in the bond market today, the "LOW VOLUME" caveat should be assumed to be in place. With that said, the price action that does exist, while not necessarily relevant, has weakened. 10's are now approaching 3.42, and MBS are either AT or just slightly below their lows of the morning. If there are any lenders out there who already priced, or have otherwise shown a previous tendency to reprice this early in the morning, we've just seen our early warning sign. There's a bit more support yet to come, and nothing here speaks to any developing trend. Just some morning choppiness.

Both MBS and Treasuries are remaining better than the weakest levels of the morning. For 10's that's just at the 3.40 mark, and for MBS, around 99-02 in 4.0's and 102-10 in 4.5's. Volume has been quite low this morning as several key participants remain on Holiday, but we do get ISM data as well as construction spending coming up in about half an hour which may draw out some domestic volume. Otherwise, it will continue to be one of those "watching and waiting" sorts of days.

There was a distinct showing of support on the 30th (last day with respectable volume in the treasury market) for price levels that futures reached immediately following the 7yr note auction. Those prices drifted higher on Friday and are now merely returning to that band of thicker volume marks. Nothing going on here to get panicked about.

China, Japan, and the United Kingdom are closed today to celebrate the New Year. Treasury trading flows were light again overnight as a result.