Heading into the after hours session, the FN 4.0 is +0-05 at 99-17 yielding 4.053% and the FN 4.5 is +0-05 at 101-30 yielding 4.263%. The secondary market current coupon is 4.095%. The CC is +73/10yr TSY and +61/10yr swap. Several lenders have repriced for the better as price improvements have held since the choppy reaction the 2 yr note auction.

As the noon hour approaches, MBS are up on the day with the 4.5 up 2 ticks to 101-27. Meanwhile, treasuries are still down on the day with the 10yr off 4 ticks, bringing the yield up to 3.381. Without support from some positive price movement in tsy's, MBS may have a tough time moving much higher. On the two day chart, we can see MBS struggle with 101-28 despite tsy yields being slightly lower than this AM: There are a couple disturbing developments in tsys that suggest they may have a tough time of their own with important technical levels. Well, at least they've had a tough time so far today in terms of the 3.38 inflection point in 10yr yields. 3.38 served as almost perfect support all week in addition to it acting as a noticeably inflection point for months. But with the slightly higher yields this AM, 10yr's basically opened above 3.38 and upon their 11AM improvements, encountered 3.38 once again, but this time, as resistance to further improvement, with a noticeable bounce right on the mark. Combine this with what we already witnessed last week in 10yr futures inability to crest the perennial high water mark at 119-29 and bonds now have the burden of proof when it comes to convincing markets they can continue improving. That's not to say they can't make a case to improve, but that until futures break 119-29, a level that coincides with 3.31--last week's resistance for yields--even an intraday improvement down past 3.38 would merely constitute a return

Despite the 4 tick improvement on the day that leaves MBS just about as close to all time highs as we could ask for, the lack of excitement this week is a bit of a let down. Sure, there was plenty of chopatility earlier in the week in MBS, but not only was it mostly confined to the range, prices actually ended exactly where they started on Monday! At least the boring and range-bound nature of the week made for plenty of predictability as the only real technical levels worthy of mention played important roles throughout the week. 101-21 became eerily supportive as the week progressed. and 101-27 mentioned as a pivot point on Monday and Tuesday maintained it's technical significance as resistance by week's end. In tsy's, the story was clearly about 3.31 and 3.38. (3.31 is an intraday standpoint whereas 3.32 would get the daily nod). And between those extremes you can see yields moving in almost perfectly symmetrical trend channels--more evidence of technical forces at work. But although the 1 week chart looks fairly well distributed between highs and lows, how strong is 3.31 vs. 3.38 in the long term? Yeah, the little teensie weensie red line (technical term) would be the 3.38 from the previous chart. To be fair, we could have extended to show that it actually has been quite significant over the past months as an internal trendline, but at the end of the day, 3.31 seems a much more daunting line to cross than 3.38. This is edified by the day over day futures chart which

With absolutely no exaggeration, all but one, maybe two of the times I've looked at my screens before writing this week MBS have been between -2 and +2 ticks on the day while changes in tsy's have been more pronounced. Same story today, at least on a price level, as 4.5's are up 2 ticks to 101-23 whereas 10's are down 6 ticks, bringing the yield up to 3.362. Neither of those levels are especially interesting as they both lie above levels that have supported 99% of the trade this week. For MBS, the level is obviously 101-21, which has received more than its fair share of mention this week, and likely needs no further introduction. And though we haven't seen much of it this week, the 3.38 lvl in tsys is equally significant. It just draws more of it's credibility from weeks past. I pointed out a "careful!" in the chart above as tsy's flirt with breaking a downtrend in yields. But the white circle on the volume forest also shows that volume picked up in response to the better buying opportunity, and on a Friday afternoon, that says a bit more than normal about the range. So at the risk of being too firm, I'm callin' it... 3.38 won't be broken with volume for the rest of the day. MBS won't break below 101-21 with volume either. That means lenders that haven't repriced yet, probably won't... 10 yr tsy futures aren't providing nearly the same level of clarity however... We'll get to a more robust discussion of this

The FN 4.0 is currently -0-02 at 99-08 and the FN 4.5 is trading +0-01 at 101-23. The range narrows...there isnt much room for further price appreciation in "rate sheet influential" MBS coupons. Mortgage rates will either go sideways or move higher. Lock.

Heading into the close, the FN 4.0 is trading +0-02 at 99-09 yielding 4.078% and the FN 4.5 is +0-02 at 101-24 yielding 4.286%. The secondary market current coupon (CC) is 4.13%. The CC is +78/10yr TSY and +67/10yr swap. As you can see in the chart below, after prices fell early in the week, "rate sheet influential" MBS prices haven't made much progress in either direction with most of the price action occurring between 101-26 and 101-20. This should continue into today's close. Again...lock!

Thursday's tend to be data-rich and today is no exception. After the "with us as always" jobless claims at 830, a concentrated dose of data and headlines hit at 10am. In the ongoing court case of Reality v. Stable Economic Recovery , Philly Fed survey served as chief counsel for the defense, topping expectations of 12.0 with a 16.7 reading. That was up from 11.5 reading in the prior month but did little to help already plummeting stocks. Philly Fed results did, however, give pause the the rally in bonds, but after a minor retracement, the LEI reading combined with the soothing words from Timayyy to bring bonds back to their strongest points of the past 2 days. Leading indicators printed down a tenth from from the .4, and the 0.3 actual was significantly lower than the previous 1.0. There was nothing organically beneficial in Geithner's testimony, but the lack of outright negatives took an unknown out of the equation. Additionally, Geithner's calls on banks to step up lending, coincided with legislation working it's way around the hill that altogether casts a bit of a shadow on supply. And of course, low supply of lending is usually favorable for rates, all things being equal. The net effect of on the bond-o-sphere has been a reasonably unchanged yield curve moving lower in yield. Other than laggard 10's and bullish 3's, the rest of the curve is 4.0-4.7 bps lower. Paradoxically, as 10's are underperforming the rest of the curve, previous weakness