Consumer Sentiment will report at 955am, and there are two Fed speakers in the afternoon (Yellen at 1:15 and Williams at 2:45), but bond markets are closed in observance of Veterans' Day and MBS will not be trading.

The following week gets off to a slow start in terms of scheduled data with relative deluge of economic reports hitting on Tuesday, Wednesday, and Thursday. Retail Sales , Industrial Production and Philly Fed are headliners with supporting roles from CPI, PPI, Empire State Manufacturing as well as Housing Starts and the Housing Market Index playing supporting roles.

The 10yr note just staged a nice little rally to the mid 2.05's for the 3pm closing marks and MBS are near their highest levels of the day, currently at 101-24. Some of the faster-acting, algorithmically-motivated lenders could even be considering a reprice for the better here, but at the very least, this alert should serve to unwind the previous risk of reprices for the worse.

The Open Market Trading Desk at the Federal Reserve Bank of New York reinvested $5.5 bln back into agency MBS markets between November 3rd and November 9th, with the majority in Fannie and Freddie December 4.0 30yr Fixed Coupons, accounting for just over $3 bln. Most of the remaining reinvestment went to Fannie and Freddie January 3.5 30yr Fixed Coupons at $1.55 bln.

(Reuters) - The monthly U.S. budget deficit shrank to $98.47 billion in October from $140.43 billion in October 2010, partly because some regular benefit payments were made early this year.

Since Oct. 1 fell on a Saturday, Treasury accelerated $31 billion of benefit payments into September, which had the effect of reducing October outlays and the monthly deficit.

Still, even when those benefit payments are added in to October's figures, the deficit for the month came in about $11 billion lower this year than was the case in October 2010.

Under the government's accounting system, October is the opening month of fiscal 2012. During fiscal 2011 which ended Sept 30, the budget deficit totaled $1.296 trillion. (Reporting by Glenn Somerville, editing by Andrea Ricci)

We just saw our first reprice of the day from one of the dynamic duo of "early-to-act" lenders. Weakness in bond markets seems a bit stubbornly persistent. Fannie 3.5's have hit the 101-17 suggested alert level mentioned earlier and additional lenders are soon at risk of repricing for the worse unless things bounce back fairly quickly. As a caveat, this weakness is a "tactical" consideration for now (in other words, it's not indicative of a broad-based shift in sentiment although we are somewhat wary of a stock market that continues to hold 1220's supportively in the S&P. 2.12% support in 10yr yields (2.11-2.13 range) is ultimately a truer test though (currently 2.068 and leaking higher). Fair amount of intermediate support around 2.09 as well.

(Reuters) - Spurring stronger growth and more robust job creation in the weak recovery are top priorities for the Federal Reserve, Chairman Ben Bernanke told a military audience at a rare public forum on Thursday.

"For a lot of people, I know, it doesn't feel like the recession ever ended," Bernanke said in remarks prepared for delivery before a town hall-style forum at which he is expected to field questions from 175 military personnel and family members.

Bernanke said the 9 percent jobless rate and record numbers of long-term unemployed Americans are serious problems preoccupying policymakers.

"We at the Federal Reserve have been focusing intently on supporting job creation. Supporting job creation is half of our marching orders, so to speak," he said.

The Fed's other job is to keep inflation in check. Bernanke said inflation should moderate and remain close to the Fed's preferred level of 2 percent or a bit less for the foreseeable future.

Bernanke defended aggressive Fed policies against critics who charge the U.S. central bank has recklessly printed money without regard for the dangers of inflation or a weaker dollar.

"It is important to understand that this type of activity isn't the same as government spending," he said.

Public appearances by a Fed chairman are rare. Bernanke's second-ever town-hall meeting -- the last was in July 2009 -- may reflect a desire to counter critics of both political parties. (Reporting by Mark Felsenthal; Editing by James Dalgleish)

Relative to recent connectivity, stocks are selling off this morning a whole lot faster than Treasuries are rallying. S&P's moved from about 1244 down to 1229 currently in futures. The sharp moves are, in part, due to some news circulating about sovereign downgrade risk for France and Austria, but stocks already look to be bouncing in line with yesterday's lows and 10yr yields didn't even make it back to yesterday's highs of 2.01 before bouncing higher (currently 2.036

MBS, meanwhile, continue to "fight the good fight," using the weakness in Treasuries as an opportunity to get rid of glut of TBA supply while buying demand is good (servicers adding duration and the usual 1+ bln of Fed support). Fannie 3.5's are currently at 101-20, 4 ticks lower on the day (after accounting for the roll). What we're hoping for into the afternoon is for benchmark 10's to hold on to 2.05 and Fannie 3.5's to do as convincing a job as possible of owning the 101-26 territory as support. If that turns out not to be possible, 101-18 would be an acceptable support level for the day after a roll. We'd certainly have reprice alert levels set at 101-26 on the upside and 101-17 on the downside, with the earlier, algorithmically-motivated lenders potentially repricing for the better or worse respectively a few ticks earlier. Still, the rate sheet bias is certainly weak this morning, leaving the door slightly more open for price improvements on strength than for negative reprices on weakness.