Just a recap in case you missed any of these developments or just needed a refresher. On 4/1, from NAMB's website: "The US Court of Appeals has granted a stay on Fed's LO Compensation rule. The hearing will be on April 5th. The RULE IS DELAYED UNTIL THE RESULTS OF THE HEARING." The Fed fired back their response here: http://usloans.com/Fedappealbrief.pdf and since no response should go without getting a response of it's own, NAMB/NAIHP's response to the response is here: http://www.namb.org/images/namb/NAMB-Response.pdf. Brian Montgomery blew the doors off the whole affair in the following link: http://www.mortgagenewsdaily.com/channels/voiceofhousing/205699.aspx

Wednesday is one of the quieter days of the week in terms of scheduled economic data and events (see the link below for an overview of the entire week), with only the standard issue MBA Apps at 7am and what is quickly becoming standard-issue Fed-Speak from Lockhart. But "quiet" in terms of data doesn't mean it'll be a quiet day in terms of market movement. With a touch of 3.50 today, we'll get to see if bonds head back for 3.40 or if more of a curveball is in store.

FNCL 4.5's did make it down to 101-12 earlier, but for the most part, the time following FOMC minutes has been spent trading a narrow range around 101-13. Treasuries similarly languish near their weakest levels of the day. The most frequently visited yield among those weak levels has been 3.489. That's where 10's hit the 3pm close, and it's also where they currently sit. The ongoing weakness has seen yet more reprices for the worse creep in this afternoon, but if you've seen one recently, we're no longer trending lower in MBS price, so that should be it for now.

(WSJ) - A resurgence of private capital is needed to extricate the U.S. housing market from its reliance on government guarantees, a top Federal Reserve official said Tuesday. President of the Federal Reserve Bank of Minneapolis Narayana Kocherlakota said about 90% of mortgages originated over the past two years had been guaranteed by government-controlled entities, such as Fannie Mae, Freddie Mac, the Federal Housing Authority and the Veterans Administration. “This heavy reliance on government guarantees is not a sound long-term strategy,” Kocherlakota said in remarks prepared for an address to the Minnesota Emerging Markets Homeownership Initiative Workshop in Minneapolis. “Over time, our country needs a mortgage market that returns to greater reliance on private risk-taking and private risk assessment, along with the enhanced regulatory oversight that is already in place,” he said. Along with weaning itself off implicit government guarantees, the U.S. housing market also should focus less on encouraging debt — through the mortgage-interest tax deduction, for instance — and more on encouraging homeowner savings and equity, Kocherlakota said.

Following the release of the FOMC minutes, bonds rallied from their worst levels of the day. But 10yr yields collided head-on with the exact same mid 3.46 resistance levels that foiled earlier attempts at gains. Yields rose more than a basis point after the resistance bounce and MBS gains moderated back toward their lows of the day as well, currently down 11 ticks at 101-13. Any ticks lower from here increase the risks of reprices for the worse.

*** A FEW FED OFFICIALS AT MARCH 15 MEETING SAID CONDITIONS MAY WARRANT LESS ACCOMMODATIVE POLICY THIS YEAR; OTHERS SAW EASY STANCE NEEDED BEYOND 2011 - MINUTES *** SEVERAL FED OFFICIALS INDICATED THEY DID NOT ANTICIPATE MAKING ADJUSTMENTS TO BOND BUYING PROGRAM BEFORE ITS INTENDED COMPLETION *** FED OFFICIALS SAW NO NEED TO TAPER SECURITIES PURCHASES AT END OF EASING PROGRAM AS DISRUPTIONS UNLIKELY - MEETING MINUTES *** FED - SIGNIFICANT INCREASE IN LONGER-TERM INFLATION EXPECTATIONS COULD STIR INFLATION, WOULD BE COSTLY TO HALT *** FED - IMPORTANT TO PLAY CLOSE ATTENTION TO EVOLUTION OF INFLATION EXPECTATIONS *** FED - BOOST TO HEADLINE INFLATION FROM ENERGY, COMMODITY PRICES RISES LIKELY TRANSITORY *** FED - UNDERLYING INFLATION LIKELY UNAFFECTED BY COMMODITY PRICE GAINS IF INCREASES NOT FAST, EXPECTATIONS REMAIN STABLE *** FED - A FEW SAID STRONGER RECOVERY, HIGHER INFLATION, RISING EXPECTATIONS MAY CALL FOR CURBING PACE, SIZE OF BOND BUYING *** FED - SEVERAL SHIFTED INFLATION RISKS TO UPSIDE IN LIGHT OF RECENT DEVELOPMENTS, POTENTIAL FOR OIL PRODUCTION DISRUPTIONS *** FED - EVENTS IN MIDDLE EAST, NORTH AFRICA, JAPAN ADDING FURTHER UNCERTAINTY TO ECONOMIC OUTLOOK *** FED - DUE TO UNCERTAINTIES, PLANNING POSSIBLE EXIT STRATEGIES FOR A RANGE OF POTENTIAL ECONOMIC OUTCOMES

MONEY MARKETS-(Reuters) - A scarcity of short-term Treasuries roiled debt markets for the third day on Tuesday, with rumors the Federal Reserve will step in to ease the supply shortage also hurting longer-dated Treasuries. A new charge on banks that lend overnight funds to the Federal Reserve has led some firms to step out of the market, exacerbating already low supply of short term bills that are used to back borrowing. The new levy by the Federal Deposit Insurance Corp (FDIC) comes at the same time as remaining debt from a $200 billion short-term Treasury supply program rolls off. The U.S. government is unable to implement a new program until Congress raises its debt ceiling, which is not expected until next month. The cost of general collateral in the repurchase agreement market is trading at zero and some issues are trading at negative rates, meaning that investors are effectively paying to lend money to banks in order to obtain the bills. The scarcity of collateral could hurt the ability of banks to raise funds in the repo market, where Treasuries are typically pledged as collateral against the borrowings. Barclays Capital analyst Joseph Abate estimates repo activity declined by around $40 billion last Thursday and Friday, the day the FDIC charge went into effect. "These institutions may have decided that the arbitrage return is too low (or indeed, negative) and they may be permanently out of the market," he said. Before the new charge, dealers had benefited from lending to the Fed for a higher rate than they could borrow in the fed funds or repo markets. Now, "if banks are still in the market then they are certainly demanding that whoever they are buying the cash from compensate them for whatever the FDIC is charging them on their deposit at the Fed," said Jefferies' Simons.

FNCL 4.5's ended up holding support at 101-13 and are currently back up to 101-18 (down 7 ticks on the day in total). 10yr notes bounced as well, near 3.48 and though yields are back down to 3.468, they've had some issues getting much lower, and things may be generally challenging on that front until FOMC. The weakness seen so far has been enough for most lenders to reprice for the worse.

(Reuters) - U.S. Treasury Secretary Timothy Geithner said on Tuesday mortgage servicers have done a poor job of helping borrowers through the housing crisis. Geithner said Treasury and regulators were working to get a rapid resolution to some of the problems at the mortgage servicers. (Reporting by David Lawder and Rachelle Younglai; Editing by James Dalgleish) 10:59 05Apr11 -U.S. TREASURY'S GEITHNER SAYS U.S. FINANCIAL SYSTEM AS A WHOLE IS IN A DRAMATICALL STRONGER POSITION THAN IT WAS BEFORE THE FINANCIAL CRISIS 11:02 05Apr11 -GEITHNER-HOUSING MARKET IN THE UNITED STATES IS STILL IN CRISIS; MILLIONS OF AMERICANS ARE AT RISK OF LOSING HOMES 11:04 05Apr11 -GEITHNER-WILL TAKE SEVERAL MORE YEARS TO HEAL THE DAMAGE TO COMMUNITIES FROM HOUSING CRISIS, RECESSION 11:06 05Apr11 -GEITHNER-MORTGAGE SERVICERS HAVE DONE A POOR JOB OF HELPING BORROWERS THROUGH HOUSING CRISIS; MUST DEVOTE MORE RESOURCES TO THE JOB

FNCL 4.5's fell as low as 101-13, but are currently on their second bounce up to 101-14. 10yr notes have gotten sideways and noisy in the high 3.47's and look as if they might try to hold support here. Even if that doesn't happen, there's more room overhead before technical support levels are at risk. FOMC minutes at 2pm is probably the best chance we have for a material change in the bond market.

It's been a choppy morning in the bond market with the benchmark 10yr yield bouncing in a wide-range between 3.40% and 3.46% while the FNCL 4.5 has seen a price high of 101-28 and a low of 101-17. Unfortunately at the moment we're sitting at the MBS price lows of the day after attempting a recovery rally following ISM data. Most lenders were late to publish rate sheets this morning so lower prices are generally already accounted for...but some trigger happy lenders may still recall and reprice for the worse, especially if FNCL 4.5 MBS prices continue their decline. We will alert if reprices for the worse are reported.