FNCL 4.5's are finally perched at 101-00, a level that had eluded us by only a tick or two for most of the day. Volume is almost non-existent and volatility even less so. All in all 4.5's are only down 4 ticks on the day. The short end of the yield curve just turned positive as well.

After bouncing off support at 3.62 and moving down to 3.59, 10yr notes have been zoning in on 3.60 and are currently at 3.597. FNCL 4.5's are still at 100-30 after a ticking down slightly and back up again. Volume is shaping up to be in line with Monday's levels--the lowest seen this week and barely more than half of Wednesday's totals. We'd keep floating toward lock cut-offs and reassess based on GUT-FLOP at that time.

Reprices for the better have been reported and more may be on the way as MBS and Treasuries are at their best levels of the day. FNCL 4.5's are at 100-30 and the 10yr note is once again grinding against the 3.59 level.

After hitting the 3.59 pivot that was so important over the past two days, 10yr yields decided not to extend the recent, spiky, mini-rally any further for the time being. FNCL 4.5's have peeled off just one tick while 10's moved back up to 3.602. Still possible to keep getting reprices for the better if MBS merely continue to hold these levels.

10yr yields recently shot down quickly, though we are hesitant to assign causality to any specific event just yet. MBS have rallied as well, but as expected not quite as healthily as treasuries with FNCL 4.5's currently at 100-29. Reprices for the better were made possible simply from the steadiness of prices, but we may see more now that some gains have been made.

The idea of "confirming support" means that we would be getting some sort of validation that 10yr yields put in their highest marks earlier in the 3.62's. The support in question is the upper line of a trend channel that has contained yields all week with the exception of yesterday's breakout. With respect to that support confirmation, it's merely "so far so good" as 10's continue to cut a tight range of yields slightly underneath the danger zone. We'd like to see a more definitive move back toward the middle of the trend channel, but aren't too sure we care too much about today's movements given the appallingly low volume and the almost universally negative money flow. It looks like the week actually ended yesterday and that today is something of an inconsequential afterthought. Whether or not you want to ascribe any significance to current movements in MBS (and we'd suggest keeping that limited), FNCL 4.5's are still at 100-26 and haven't deviated more than a tick in either direction since first reaching that price. In fact, even if a low volume supportive run back to the middle of the range materializes, MBS won't likely be as willing to make gains as quickly as treasuries. If you're trying to make a lock decision today, you're probably fine to hold off until imminent reprices for the worse or cut-off, whichever comes first. And here's hoping it's the latter!

In a report released today on Inflation, The University Of Michigan notes three important considerations. First, inflation is expected to rise moderately in the short term, but this does not translate to a rise in longer term expectations. Second, that real incomes are expected to decline. And finally, that the lowest wage-earning demographic also has the highest level of pessimism regarding inflation. This is staunch support for the recently espoused notions of ongoing problems with the Margin Squeeze.