The day kicks off on positive note for bond markets which have held their gains at the start of the New York session.  This follows on the heels of a somewhat choppy overnight session that once again increased in volume substantially from the quiet weeks in late December, and is getting back in line with averages from earlier in that month.  There was limited "drama" overnight as Treasuries mainly took their cues from German Bunds, which weakened earlier in order to build in a concession for an auction, but both benchmarks rallied afterwards as Germany pinned a sub 2% yield--and this time with actually enough bids to cover the issuance! 

10yr yields are a just 0.01% lower this AM around 1.946 and Fannie 3.5 30yr MBS are currently about 2 ticks better at 102-28.  Two pieces of industry specific news are already out: one of them inconsequential and the other one somewhat alarming.  The inconsequential but perhaps still interesting MBA Application data hit at 7am this morning and is updated in the table of economic data below.  The more alarming news is that the first shots are now being fired regarding the increased Guarantee Fees mandated by the recently passed stop-gap budget bill.  One major lender is out this morning with a note to its accounts apologizing for increased rates due to today's implementation of pricing that reflects the soon-to-be-required G-Fee increase (30-40bps in price according to the lender).

The only major economic data today comes in the form of November Factory Orders which are expected to have risen by 1.6%.  That will hit at 10am.  Please note: ADP Employment numbers have been moved to tomorrow.