Although we're technically in the after hours session as far as the official bond market close, things are still somewhat active. 10yr yields and FNCL 4.5's are both near their worst levels of the day with the former at 3.457 and the later at 101-19. Reprices for the worse are still a risk, and we've seen a few so far. If 10's rise above current levels and MBS fall to 101-18 or lower, reprice risk increases, especially for those who haven't seen them yet.

C30 loan pricing has improved on average by another 28.3bps today. The largest rebate gains are seen in note rates below 4.75%. After reprices for the better today, the Best Execution 30 year fixed mortgage rate has improved to 4.875%. For anyone who says lenders are "holding out" on rebate, we've noted a tightening of primary/secondary spreads this week which means lenders are actively attempting to attract new locks. Of course this is a high level overview of the five major lenders which means it is possible that lenders who are lower in the supply chain have indeed added extra juice (margin) to their rate sheets to reduce fallout.

Marketwatch is reporting that Kansas City Fed President Thomas Hoenig, a noted hawk, will step down in October at the mandatory retirement age of 65. "Hoenig is blazing a trail as an outspoken critic of the Fed’s innovative quantitative-easing monetary policy, warning that the Fed’s zero interest rate policy and bond-buying program is a dangerous gamble that is likely to create asset bubbles in future years."

(Reuters) - The Obama administration on Thursday pushed back against Republican moves to kill several of its foreclosure prevention programs, saying they would close the door on struggling homeowners facing the worst U.S. housing crisis in generations. "The administration remains committed to reaching eligible homeowners to give them every opportunity to avoid foreclosure and will continue working to make our programs as effective as possible," an Obama administration spokesperson said on Thursday. Republicans in the U.S. House of Representatives earlier announced they would consider four bills aimed at killing different administration efforts to keep borrowers in their homes. (corbett.daly@thomsonreuters.com)

Bonds were quite content with a sub-1300 S&P, but when the index recently shot from 1294 to 1303, bonds followed with higher yields and lower prices in MBS. 10yr notes haven't taken long in moving from their best levels of the day closer to their worst. FNCL 4.5's have fallen almost straight down to 101-19, near their weakest levels of the day. This is the highest risk of reprices for the worse so far today.

The former treasurer of mortgage lender Taylor, Bean & Whitaker pleaded guilty Thursday to conspiring to commit bank, wire and securities fraud in connection with a $1.9 billion scheme that contributed to the failures of Alabama's Colonial Bank and Taylor, Bean & Whitaker. Florida resident Desiree Brown pleaded guilty in Virginia court and now faces a maximum of 30 years in prison, according to the U.S. Department of Justice. She is scheduled for sentencing June 10. According to court documents, Brown admitted that from late 2003 to August 2009, she and her co-conspirators were players in a scheme to defraud to get funding for TBW to cover operations-related expenses. They at one point tried to obtain $570 million worth of taxpayer funding through the government's Troubled Asset Relief Program. Their scheme generated money for TBW through fictitious sales of mortgage loans to Colonial Bank, as Brown and co-conspirators sent the bank mortgage data for loans that didn't exist or that TBW had already committed or sold to other investors, the Justice Department said. They also caused TBW to sell fictitious trades to Colonial Bank that had no pools of loans collateralizing them.

FNCL 4.5's were able to put in a support bounce at 101-22 and make it to their highs of the day at 101-25. They're just off those highs now at 101-23. In a similar move, 10yr notes fell to their lows of the day at 3.415 and have since rebounded, now threatening to break into 3.43. Overall, the environment is more positive than not, and reprices for the better may be seen. Volatility is calming down somewhat, but the market remains active and prone to rapid movement. The only implication for originators is that we remain vigilant and closely in-tune with ongoing changes in MBS price. If 10's cross the mid 3.43's, we could see additional pressure on MBS prices.

Still very much too soon to tell if prices will ultimately end up lower when the dust settles, but the first major move following the auction is a downtick in FNCL 4.5's to 101-22 from highs of 101-25.

U.S. SELLS $29 BLN 7-YEAR NOTES AT HIGH YIELD 2.854 PCT, AWARDS 75.76 PCT OF BIDS AT HIGH *** 7-YEAR NOTES BID-TO-COVER RATIO 2.86, NON-COMP BIDS $20.64 MLN *** PRIMARY DEALERS TAKE $13.29 BLN OF 7-YEAR NOTES SALE, INDIRECT $14.39 BLN

The bond market collided with it's most important resistance level at a 10yr note level of 3.42. FNCL 4.5's are just a touch off their highs of 101-24, currently at 101-22+. No major pull-back yet, and both markets still strong. Some pre-auction positioning is possible. but not to be feared unless otherwise noted.

*** S&P CONVERTS RATINGS ON U.S. GOVERNMENT TO UNSOLICITED RATINGS *** SAYS IT WILL CONTINUE TO RATE THE U.S. GOVERNMENT AND CLASSIFY THE RATINGS AS "UNSOLICITED" *** S&P SAYS WILL WITHDRAW ALL ITS RATINGS ON THE U.S. GOVERNMENT ON MAY 24 *** S&P SAYS DECISION DOES NOT CHANGE ITS VIEW OF CREDITWORTHINESS OF U.S, AAA/STABLE/A-1+ RATINGS ON THE U.S. GOV'T REMAIN UNCHANGED

10's have broken lower from their earlier range and have inched into their best territory of the day with a 10yr yield at 3.426. FNCL 4.5's meanwhile have pushed higher to 101-23, 10 ticks higher on the day. Both are at their best levels of the day. We've seen one reprice for the better so far and it's possible other lenders will follow suit even ahead of the 7yr note auction. In breaking news that may be helping give a lift to bonds, S&P just announced they will withdraw all their current ratings of the US government and instead classify the ratings as "unsolicited."

Benchmark 10yr notes are at 3.438 currently, just below their recent range but not yet testing more significant lows toward 3.42. FNCL 4.5's are up 7 ticks on the day at 101-21 and are maintaining a tight range. No reprice risk yet, so we're continuing to hold out until either the range breaks or auction time provides us an indication of which way things might move.