This alert isn't so much to affirm that MBS and Treasuries are rallying and will continue to do so, things can still go either way, but certainly, the tenor of the previous alert no longer applies. After the domestic stock market open, S&P's continue to weaken, currently at 1167. With the earlier drama of runaway German yields dragging up US Treasuries over, we've seen a more connected stock lever pulling yields back down under 1.93, not quite to the lowest levels of the morning, but in the neighborhood. MBS are back up to 101-30 in Fannie 3.5's. Things are choppy enough that this isn't sufficient cause for reprice but any lenders who released initial sheets around 930 could begin considering such things if 3.5's continue to hang around the 101-30 level or higher.

30-year fixed-rate mortgage (FRM) averaged 3.98 percent with an average 0.7 point for the week ending November 23, 2011, down from last week when it averaged 4.00 percent. Last year at this time, the 30-year FRM averaged 4.40 percent.
15-year FRM this week averaged 3.30 percent with an average 0.7 point, down from last week when it averaged 3.31 percent. A year ago at this time, the 15-year FRM averaged 3.77 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.91 percent this week, with an average 0.6 point, down from last week when it averaged 2.97 percent. A year ago, the 5-year ARM averaged 3.45 percent.
1-year Treasury-indexed ARM averaged 2.79 percent this week with an average 0.6 point, down from last week when it averaged 2.98 percent. At this time last year, the 1-year ARM averaged 3.23 percent.

The summary, available on the company's Web site at www.FreddieMac.com/investors/volsum, provides information on Freddie Mac's mortgage-related portfolios, securities issuance, risk management and delinquencies.

(Reuters) - U.S. consumer sentiment held up in late November as some of the gloom over the economic outlook ebbed, a survey released on Wednesday showed.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment came in at 64.1, up from 60.9 the month before. The index was a hair lower than its preliminary reading of 64.2 and shy of the median forecast of 64.5 among economists polled by Reuters.

"The most important aspect of improved prospects for the economy was that consumers anticipated slight job gains," survey director Richard Curtin said in a statement. "Consumers were no more positive about the current state of the economy, but they were less likely to expect the economy to worsen in the year ahead."

The survey said only a trivial number of interviews were conducted after the deadlock announcement by the congressional "super committee" charged with reaching a deal on deficit reductions, suggesting consumers had not incorporated the failed efforts into their economic expectations. Even so, confidence in the ability of current policies to improve the economy has remained at record lows for the past several months and beleaguered consumers are sensitive to setbacks.

The survey's barometer of current economic conditions rose to 77.6 from 75.1, while the gauge of consumer expectations gained to 55.4 from 51.8. The survey's one-year inflation expectation held steady at 3.2 percent, while the survey's five-to-10-year inflation outlook was also unchanged at 2.7 percent. (Reporting by Leah Schnurr, Editing by Chizu Nomiyama)

10yr yields have now risen to 1.958, definitely back inside their longer term sideways trend (the limits of which are just under 1.94), but things could always be worse... Just ask the EU, namely German Bunds (the EU benchmark), which have risen from around 1.88 this morning (just like US Treasuries!) to over 2.05 currently (NOT like US Treasuries!). This Energizer Bunny-like sell-off in Bunds comes after a flat -out FAILURE of an auction earlier this morning (imagine a US auction getting a bid-to-cover less than 1.0...) and has been dragging 10yr yields up, up, and away ever since.

The ugliness has spilled over into MBS-land with Fannie 3.5's now down to 101-23 at their worst, but recently bounced back to the 101-26 level. Unless things bounce back quickly (which is starting to look more and more possible as domestic stocks move lower at the open), this weakness will be seen in rate sheets as they start rolling out.

After the 830am glut of economic data comprised of Durable Goods, Jobless Claims, and Consumption/Expenditures, MBS fell abruptly (in the context of their fairly narrow range) to 101-26. Despite the sharp move, prices had been 101-30 to 101-31 ahead of the data, making the drop a fairly palatable 4-5 ticks (just over an eighth of a point). That's not to say things couldn't get any worse, but they haven't yet.

The steady march higher in benchmark yields this morning is a bit ominous, but keep in mind that at 1.943, 10yr yields are less than half a bp higher than yesterday's 3pm close. Stocks aren't following this move either, which suggests less momentum than there otherwise might be on a directional move. If stocks stay subdued, sellers will eventually get their fill and this morning's seemingly scary moves in bond markets could turn out to be a complete non-event. Too early to tell, and trading levels later in the day could be distorted by low volume.

(Reuters) - New U.S. claims for unemployment benefits rose slightly last week but held below 400,000 for the third straight week, suggesting the labor market was gaining some traction.

Initial claims for state unemployment benefits climbed to a seasonally adjusted 393,000 from an upwardly revised 391,000 in the prior week, the Labor Department said on Wednesday.

Economists polled by Reuters had forecast claims rising to 390,000 from the previously reported 388,000. (Reporting by Jason Lange, Editing by Chizu Nomiyama)

(Reuters) - New orders for a range of long-lasting U.S. manufactured goods unexpectedly rose in October, but sharp downward revisions to the prior month's data and weak spending plans by businesses suggested manufacturing was taking a breather.

The Commerce Department said on Wednesday durable goods orders excluding transportation rose 0.7 percent after a downwardly revised 0.6 percent increase in September. Economists had forecast this category unchanged from the previously reported 1.8 percent rise.

But weak demand for transportation equipment saw overall orders falling 0.7 percent after declining 1.5 percent in September. Economists had forecast overall orders dropping 1.0 percent last month.

Overall orders were dragged down by a 4.8 percent drop in bookings for transportation equipment as orders for civilian aircraft dropped 16.4 percent last month. Boeing received only 7 orders for aircraft, according to the plane maker's website, down from 59 in September. That overshadowed a 6.2 percent increase in orders for motor vehicles.

Despite the rise in orders excluding transportation, the tenor of the report was weakened by a drop in non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending. The category fell 1.8 percent last month after a downwardly revised 0.9 percent rise in September. It was the largest decline since January, when it fell 4.8 percent.

Economists had expected a drop of 0.6 percent from the previously reported 2.9 percent jump. Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, fell 1.1 percent after declining 1.0 percent in September. (Reporting by Lucia Mutikani, Editing by Andrea Ricci)

(Reuters) - U.S. consumer spending barely rose October as households took advantage of the largest increase in income in seven months to rebuild their savings, a government report showed on Wednesday.

The Commerce Department said consumer spending edged up 0.1 percent, slowing sharply from a revised 0.7 percent increase in September.

Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, to rise 0.4 percent last month from a previously reported 0.6 percent gain.

When adjusted for inflation, spending nudged up 0.1 percent last month, pointing to a loss of momentum after a relatively strong third quarter, when it grew at an annual rate of 2.3 percent.

Still, that was unlikely to change perceptions of solid economic growth in the current quarter. Income rose 0.4 percent last month, the largest gain since March. That was a touch above economists' expectations for a 0.3 percent increase and followed a 0.1 percent gain in September.

Taking inflation into account, disposable income rose 0.3 percent, the largest increase since October 2010. It had declined 0.1 percent in September. Savings rose to annual rate of $400.2 billion from $376.9 billion in September. (Reporting by Lucia Mutikani, Editing by Andrea Ricci)

Things are still settling in to their respective grooves this morning, but MBS and Treasuries are generally flat compared to yesterday afternoon's trading levels. This after a somewhat interesting night that saw a good mix of high and low volume. 10yr yields were in the high 1.8's during the lower volume Asian hours as a Japan was out and "risk-off" was the theme of the session. Stocks fell sharply as well.

Those low yields led to massive amounts of selling as the EU session increased volume, but a weak German Bund auction helped domestic 10yr yields cap the selling in the 1.93/1.94 area.

There's plenty of domestic economic data coming up this morning:

*830am Durable Goods - new orders are expected to have fallen from -0.6% previously to -1.0%. Last month's strong +1.8% that excluded transportation is seen falling to 0.0% this month, while the numbers exclusing defense and aircraft are seen falling from +2.9% last month to -0.6%

*830am Personal Income/Outlays - Income seen rising to 0.3% from 0.1% last month. Consumption (outlays) seen falling to 0.4% from 0.6% last month. PCE price index seen rising 0.1% month-over-month

*830am Jobless Claims - After last week's 388k, Jobless Claims are expected to have risen slightly to 390k with continued claims at 3.605 mln vs 3.608 mln.

*955am Consumer Sentiment (Final) - Seen roughly unchanged at 64.5 versus last month's 64.2.

* 1pm 7yr Treasury Note Auction

With MBS at 101-31 at the moment, 101-26 seems like an excellent lower level at which to set your automatic alerts today (adjust up slightly if you have a traditionally fast-acting lender in mind). Also, remember that this is essentially the last day of the week so it might not take as much weakness or volatility to prompt a pullback in pricing.