(Reuters) - JPMorgan Chase & Co has been sued for $95 million by the trustee for securities marketed in 2005 by the former Bear Stearns Cos over alleged misrepresentations regarding the underlying mortgage loans.

US Bank NA wants to force JPMorgan to buy back the mortgage loans because of alleged breaches of representations and warranties regarding the Bear Stearns Asset Backed Securities Trust 2005-4, for which it serves as trustee.

It also said JPMorgan has refused to provide the underlying loan, as the trust documents require, so it can investigate the extent of the alleged breaches.

It is one of many lawsuits seeking to hold banks responsible for investor losses over mortgages that may have been toxic, defective or improperly underwritten.

Total Construction Spending in the month of November increased by 1.2 percent to its highest levels since June 2010 after Falling by 0.2 in October according to a report released by the Commerce Department. Economists polled by Reuters had expected an increase of 0.5 percent.

Private spending rose 1.0 percent to its highest level since December 2009.

The better-than-expected results are consistent with recent housing-related data than has been generally slightly stronger in the latter part of 2011 and although the Construction Spending report is not as much of a market mover as the ISM Manufacturing numbers reported at the same time, it is potentially contributing to the "risk-on" sentiment.

Counterpoint: Being able to say "highest/best levels since June 2010 for the headline or Dec 2009 for private spending" is all well and good, but such statements grossly misrepresent reality. Consider the Private Residential Spending component as an example. It rose from $517.3bln to $522.3 bln. That seems fine, and is indeed it's best level since Dec 2009 (sounds impressive, right?), which is certainly a better thing than an ongoing slide lower, but as you'll see later today in a chart posted to MBS Commentary, this is effectively still a skid along the bottom--just barely considering a break out of an extended stay in a range of the lowest levels since the late 90's. In March 2006, this same figure was nearly $1 Trillion. It would need to move over $650 bln in order to break a plateau from 2001-2002.

The Purchasing Managers Index, a gauge of manufacturing activity, rose to a six month high of 53.9 in December, up from 52.7 in November according to the Institute for Supply Management. Economists polled by Reuters had been expecting a modest improvement to 53.2.

While most of the internal components of the report showed similarly moderate gains as the headline PMI, the Employment component rose from 51.8 to 55.1, outpaced only by the rise from 49.0 to 54.0 in Imports. Despite the small improvement over last month's 56.7 to 57.6 this month, New Orders are at their highest level since April.

This moderately bullish report fits well within the theme of a generally, albeit slowly improving domestic economic situation and stock futures/bond yields are edging up accordingly. Volume also picked up noticeably after the data, suggesting we could indeed see a decent level of connection to the rest of the week's economic data. A report on Construction Spending was released at the same time, also with better than expected results, adding to the "risk-on" sentiment which is putting some pressure on bond markets.

MICA reported the following additional key private mortgage insurance industry statistics for the month:

Dollar Volume: Dollar volume of primary new insurance written on newly originated conventional mortgage loans totaled $5,568 million in November. Dollar volume in October was $5,149 million.

Certificates Issued: MICA members reported that 25,074 borrowers used private mortgage insurance to buy or refinance a home in November. October saw 26,293 certificates issued.

Applications: The number of private mortgage insurance applications received in November by MICA members totaled 27,970. October applications totaled 29,508.

Defaults and Cures: MICA members reported 39,279 defaults and 33,964 cures in November.

While it wouldn't be accurate to say that trading volume is magically higher to begin the new year, something is noticeably "different" about the level of activity this morning. Treasuries were forced to follow German Bunds to some extent, which have been significantly weaker (partly due to general "risk-on" trading, and ostensibly in preparation for auction supply later this week).

It's as if markets are waking up from a daze and have been in the process of assessing the situation so far this morning. Traders were quick to dig their heels in around the 1.95% level in 10yr yields which has generally corresponded to Fannie 3.5 MBS prices around 102-20, but no lower than 102-18. Considering that this is only 7 ticks down from the best closing prices in roughly 3 months, this feels like one of the more positive scenarios we could have expected to begin the year.

But now begins that process of deciding on and committing to action after the aforementioned "assessing of the situation." There's certainly high volume technical support around current 1.95 levels in 10yr yields, but if bond markets took a slightly bearish turn on the week (perhaps by way of discounting a bigger-than-expected NFP number on Friday?) they'd be perfectly within their rights to move up into the 2's. Really, any trading that doesn't meaningfully cross a wide band of support around 2.10 ("wide band" meaning 2.07-2.13-ish) is a long-term positive. Support levels for MBS in the short term include 102-19 most immediately, followed by 102-13.

Beyond that, we're also resigned to "assessing the situation," and may be refining our range expectations when volume gets a bit closer to historically normal levels. The week's economic data is in the link below:

Happy New Year!