Really, it's both stocks and bonds that made an attempt to be something other than boring here at the end of the day. 10's shot down to 3.23's recently and looked like they might break the previous low yield from just before 2pm, but no such luck! The retracement was almost an equally as steep run up to recent yield highs that looked as if it might break the important 3.252 mark. NO SUCH LUCK! This is about as much and as fast as bonds could move at this point today without really "doing anything at all." Move along folks... Nothing to see here... That being said, the fact that bonds didn't weaken past previous support keeps MBS at a just-barely-high-enough level to warrant that same "trickle" of potential reprices for the better that we mentioned earlier. A few have been seen, and a few more may come in before the day is done.

(Reuters) - A key Republican in the U.S. House of Representatives on Thursday said he would try for the third time to eliminate government controlled mortgage finance giants Fannie Mae and Freddie Mac within five years. "We have waited for years to do something. It is time to start doing something," Texas Representative Jeb Hensarling, the fourth ranking House Republican, said in an interview with a small group of reporters in his office. Hensarling said he would reintroduce on Thursday his legislation to end the conservatorship of Fannie Mae and Freddie Mac within two years of passage. Fannie Mae and Freddie Mac would then enter receivership or be placed back into the market for "limited" operations for a maximum of three more years. After that, the private market would take over. The White House and Congress are in the midst of a major policy debate on how to overhaul the finance system for buying U.S. homes, which collapsed in 2008.

After reaching 102-16, MBS fell to 102-12 and have since ticked up to 102-13, decreasing chances of reprices for the better. A late day rally in stocks is coaxing benchmark yields higher and the 10yr briefly rose over 3.25 but is currently at 3.246. This is just on the bullish side of the day's major pivot range between 3.25 and 3.26. Holding around here or lower in 10yr yields leaves the door ever-so-slightly open for a reprice for the better to still trickle in, but not likely.

Reprices for the better have been seen as MBS maintain their recent gains that brought the FNCL 4.5 to 102-17. This is only down 4 ticks on the day. 10yr yields have improved as well, dropping to 3.2334 and holding a range between 3.23 and 3.25. The news out of Libya caused a noticeable uptick in volume, so lenders would be justified in repricing for the better here if they have not already.

Bonds had been drifting sideways, perhaps slightly stronger but still within recent ranges until breaking news hit around 1:21pm that Libya's defense ministry said on State TV that any foreign military act against Libya will endanger air and sea traffic in the Mediterranean. Minutes later, this someone cryptic comment became more clear when the Defense Minister said that Libya would retaliate against civilian targets. 10's broke 3.26 and have moved lower to 3.2498 while FNCL 4.5's rose to 102-14. The possibility of reprices for the better will depend on the longevity of these recently achieved levels. Admittedly, this was "so-so" news that happened to come at a slow time of day. Markets may be overreacting...

On average among the five major lenders, C30 loan pricing is 33bps worse today with the largest rebate reductions seen in note rates below 4.875%. Yesterday loan pricing improved enough to allow for 4.75% 0+0 C30 quotes. Those gains have been erased today and "Best Execution" has risen back to 4.875% . 4.75% quotes are still on the board but the overage it pays makes for a skinny deal, especially on LTVs over 75. .

Yesterday before the major leg of the rally, the last low made by 10yr notes was seen around 3.26. Then again this morning, this level supported yields before finally giving way for a test higher in the 3.28's. After stabilizing, yields have again returned to the 3.26's to test what was previously a ceiling this time as a floor of resistance. Unfortunately for bonds, this has held firm and thus prevented FNCL 4.5's from getting any higher than 102-10. The market has slowed down considerably now that all the week's economic data is out of the way and we remain Japan-Headline-Free for what seems like an eternity. Volume is off a cliff and we're stuck between 3.26 and 3.28's until further notice. Breaking on the high side would prelude reprices for the worse and low side, reprices for the better. We'll let you know if either happens.

After more than a few harrying moments this morning, 10yr notes look to have their best chance at holding an important support zone in the 3.28's. They've been doing an elegant dance of interconnection with the S&P over the last few hours and we had been looking for stocks to break into 1274's in the S&P in order for 10's to get into the 3.26's. This just happened, and FNCL 4.5's are back up to 102-10, reducing risks of reprices for the worse. 10's still need to break 3.264 for a more bullish signal, but this is an improvement from where we were.

Once again, we're facing a bit of an uncertain situation as to the likelihood of reprices for the worse. Given that the stock lever has been so connected of late and that the S&P has yet to eclipse recent highs of 1278.82 casts a bit of doubt as to whether or not 10yr yields will break into the 3.29's. However, with FNCL 4.5's recently having dipped into 102-06 / 102-07 territory, risks have increased somewhat, despite the lack of a clear signal. On the bright side, an S&P in the 1280's and/or 10yr note into the 3.29's looks like it would be a clear signal given the established trends of correlation between stocks, Treasuries, and MBS so far this morning. Bottom line, there IS a chance, but if you're needing or wanting to hold off as long as possible, these are the trigger points we're watching.