No matter what your favorite market mover might be, there will be more of it tomorrow. More economic reports... More Fed Speak... More Auction... And what we can only assume will be a 2nd, 3rd, and at least 4th helping of EU Headlines, the greatest market mover of them all! Hey... we're not thrilled about it, but spades are spades. Even so, here's the whole deck tomorrow

International Trade at 830am
Jobless Claims at 830am
Import/Export Prices at 830am
Fed's Lockhart at 9am
Fed's Evans (uber-dove) at 1040am
Bernanke at 1145am
30yr Bond Auction at 1pm
Treasury Budget at 2pm
and the weekly Fed Balance Sheet at 430pm

In addition, it will also be the first day that December MBS coupons will be the front month for Fannie and Freddie 30yr TBA's meaning that, yes, you will see an 8 tick drop in prices on the chart. We already commented on the probability that this will still leave tonight's daily mark at or around the 101-26 technical level in Fannie 3.5's in the following post: (also, don't miss the slightly trepidatious thoughts at the end.

This alert isn't so much about proclaiming the likelihood of reprices for the better as it is about shifting the stance of the previous, more bearish alert at 11:14. Things have certainly changed since then. We weathered the storm of a lackluster auction fairly well, and now, with the help of a stock market and Euro/Dollar in full-sell-off mode, MBS have actually been trading in a positive trend channel in the PM hours.

That said, we still wouldn't get hopes up for positive reprices too much. 10yr yields are just now back to pre-auction levels and MBS are only barely inside the lower end of their positive afternoon trend.

Stocks seem to be showing some resolve against a sell-off that kicked into high gear after the Eurogroup's Jean-Claude Juncker characterized the Euro Zone's public debt issues as "a crisis" (ironically, in an attempt to refute the notion that the Euro itself was in a crisis). Certainly, the Euro is not in a crisis in the big picture, but certainly it's not looking so hot in the intermediate term. In trying to defend the Euro, Juncker unwittingly added to the bonfire of uncertainty that is the entire sovereign debt mess in the EU. And for that, Jean-Claude, bond markets thank you (and MBS watchers MIGHT even see a reprice or two in the process! look for a 10yr benchmark around 1.95 and MBS at or above 102-06 in Fannie 3.5's to make that more likely).

Versus a 1pm when-issued yield at 2.01, today's auction stopped at 2.03, for a tail of 2bps. Not that great and made slightly worse by the lackluster demand of 2.64 dollars bid for each dollar auctioned versus recent averages over 3.0. Dealers were forced to load up on more than usual taking over half the issue, leaving non-dealers with 49.8% whereas they've recently been counted on for 65%.

Italy-inspired macroeconomic drama will keep the negative reaction to this one pretty muted, but bond markets certainly ticked weaker immediately following the auction, but have started coming back already. Seems like 102-00 in MBS and 2.0 in 10yr yields are good levels to watch as tipping points. If Fannie 3.5's are near 102-00 or better, then reprice risk will stay at bay. Moreover, given that a pretty crappy auction only elicited a few bps of movement in 10's, it's a safer assumption that Euro-headlines continue to carry the most clout.

Like yesterday, MBS approach today's Treasury auction having traded in a range "inside" yesterday's range. We make an exception for the earlier run up above 102-10 not only because of it's brevity, but also the prevalence of the 102-06 ceiling yesterday and today.

10yr yields have been doing well by comparison, essentially trading a pivot off yesterday's lowest yields in the 1.99's. Although the world is largely focused on the Italy-inspired risk-off trade, an auction that deviates from averages by a wide enough margin could push yields back over 2.0, or lead to a break of 1.95 resistance (but the latter feels like it relies more on "panic" as might be manifested by stock/euro weakness). At any rate, here's the run-down of recent 10yr auctions:

- 6 out of the last 10 have stopped at lower than expected yields
-bid-to-cover has been mostly over 3%, averaging 3.06 for the last 4 refundings
- indirect bidders have averaged about 44%.

It's a slight concern any time rates are rallying into an auction and with 9/13/11's stopping out at 2.000%, today's will be vying for the lowest high yield in modern history. Instinctively, that seems like a challenge, but we been surprised in the past by the degree to which markets have traded in the opposite direction of such fears. We'll know in about 15 minutes either way.

Ginnie Mae today reported that Fiscal (FY) 2011 net income reached a corporate highpoint of $1.184 billion, surpassing $541.5 million in FY 2010 and a previous high of $906 million in FY 2008. Revenues of $1.064 billion were up from $1.011 billion in 2010, while retained earnings rose to $15.7 billion from $14.6 billion.

“Ginnie Mae has had a remarkable year; it’s our best yet,” said Ginnie Mae President Ted Tozer. “Our financial performance this fiscal year – despite a mortgage market still in turmoil – is a testament to our well-functioning business model. Our business is simple, our approach to risk-taking is conservative, and our ability to finance government-insured mortgages is helping to keep the housing market afloat.”

(Reuters) - Italy's debt woes signal "a new, even more dangerous phase in Europe's debt crisis," Mohamed El-Erian, co-chief investment officer at PIMCO, said on Wednesday.

El-Erian, who helps oversee more than $1.2 trillion at PIMCO, home to the world's largest bond fund, told Reuters that the European Central Bank can act as a circuit breaker but can only be effective if its actions are supported by a host of other measures.

PIMCO had $4.8 billion in exposure in Italian debt, according to the latest filings compiled by Thomson Reuters Ownership intelligence data.

"Domestic politics are undermining already complex relations among Italy and it's external creditors," El-Erian said. (Reporting by Jennifer Ablan; Editing by James Dalgleish)

We'd hope and mostly expect lenders to be a bit more reserved on settlement days when MBS fall to their lows, especially considering that benchmarks remain relatively strong and flows essentially non-existent for TBAs, but we have seen a few lenders throw out reprices for the worse on these sorts of situations in the past.

With a brief exception, Fannie 3.5's topped out at 102-06 several times this morning and now sit at 101-31. The earlier in the day a particular lender released rates, the more possible an early reprice for the worse becomes. Overall, we wouldn't consider reprices very likely in general, but wanted to alert you that they're at least POSSIBLE here at the lows of the day (increasingly so if bond markets deteriorate further. In that case, you'd be looking for a clear break of 1.98 in 10yr yields--probably approaching 2.0--and a test of 101-26 in Fannie 3.5s)