Around noon, news hit that the House would reconvene...

Treasury yields and Stocks have continued a mostly downward trajectory following the morning's first major Fiscal Cliff headline from Harry Reid. Since then, there has been a small barrage of Cliffy rumors, but the lack of clarity has ultimately benefited bond markets.

Fannie 3.0 MBS continue to grind against the same 104-29 high that began at 11am, and positive reprices have started trickling in. As MBS continue to hold or improve upon these levels, reprices continue to be possible.

As for the Cliff headlines, Senator Scott Brown's Facebook page indicated that he'd "just learned the Pres. reached out to Senate GOP leadership with a proposal. It is the first such proposal to be put forth."

CNN added that Obama told Mitch McConnell that he'd send the Senate a scaled-back proposal, ostensibly corroborating Brown's Facebook page, but shortly thereafter, John Harwood (CNBC) said via Twitter:

"Sr. WH official tells me that, contrary to reports from Repubs, president will NOT be sending a fiscal cliff proposal to Capitol Hill."

Sneaky Fiscal Cliff headlines... coincidentally popping up within 1 minute of the 10am economic data. While the Consumer Confidence numbers were substantially weaker-than-expected, they weren't the culprit of the biggest surge in volume and volatility since last Friday. That honor was already reserved for the first Fiscal Cliff headline of the week.

In today's case, it's Senate Majority Leader Harry Reid saying that going over the Fiscal Cliff "Looks like where we're headed." Doesn't sound like much, perhaps, but it's the "first impression" for the last few days of Fiscal Cliff deal-making potential. Whether or not it's posturing or honest sentiment, we can't be sure, but it has certainly turned markets into a stirring creature for the first time this week.

Fannie 3.0s are up 6 ticks since the news, also up 6 ticks on the day at 104-28. 10yr yields dropped from 1.755 to 1.722 in short order and S&P's are off a quick 8-9 points.

For most lenders, this is too early in the day for a positive reprice, not to mention too emotional a move. There's an outside possibility for positive reprices among lenders who priced before 10am IF current gains demonstrate firm staying power. Still too early to assume that will be the case. The more important point is this: we have our first market-moving headline of the week and negative reprice risk is non-existent at the moment.

- Headline Confidence down to 65.1 vs 70.0 forecast
- Previous month revised to 71.5 from 73.7
- "Present Situation" ROSE to 62.8 from 57.4
- "Expectations" FELL sharply to 66.5 from 80.9
- Previous Month's "Expectations" revised down from 85.1
- "Present situation" highest since August 2008
- "Expectations" Lowest Since Nov 2011

- 377k vs 378k Consensus
- Highest Since April 2010
- 4.7 Months Supply vs 4.9 Previously

Sales of new single-family houses in November 2012 were at a seasonally adjusted annual rate of 377,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.4 percent (±16.8%)* above the revised October rate of 361,000 and is 15.3 percent (±18.7%)* above the November 2011 estimate of 327,000.

The median sales price of new houses sold in November 2012 was $246,200; the average sales price was $299,700. The seasonally adjusted estimate of new houses for sale at the end of November was 149,000. This represents a supply of 4.7 months at the current sales rate.

In the absence of meaningful inspiration, Treasuries drifted inconsequentially higher in yield overnight. The weakest levels were seen just before the domestic open and perfectly matched yesterday's overnight yield highs at 1.783 in 10yr Notes. Both Treasuries and MBS were already recovering by the time 8am rolled around, and were already bouncing by the time the slightly stronger-than-expected Jobless Claims data printed at 8:30am.

In other words, the Claims data didn't "stop a rally." Not only did the Labor Department note that Claims were estimated in 19 states due to the holiday, but this simply isn't the data that markets are looking for. Indeed it's time again for everyone's favorite holiday game: Fiscal Cliff headline potential!

Political leaders are back in Washington today and it just wouldn't be late December 2012 if we couldn't look forward to SOMETHING being said to inform markets' collective level of hope that a Fiscal Cliff deal--even if merely a stop-gap--is achievable before the New Year. This eventuality should be good for the most concerted movement of the week, provided that it's not one of those foregone conclusion-type headlines.
,br/> Nothing to report on that front, yet, and more expectation than guarantee that we'll even get anything actionable (but it would seem like a violation of common courtesy for Congress and the President to be back at work today without tossing at least a nugget or two toward the begrudgingly eager audience).

Until then, bond market trading seems predisposed to more of a sideways grind than a directional mission. MBS just ticked into positive territory for the first time this morning (104-23 in Fannie 3.0s), after having been as low as 104-19 earlier. 10yr yields are close to their lowest levels of the morning, currently trying to break lower past 1.765. Stocks are similarly trying to break their lows of the morning with the analogous level for S&P futures being 1415.

The next scheduled data of the morning will be the Consumer Confidence report at 10am followed by scheduled Fed Twist buying from 10:15 to 11:00am. Neither of these hold a candle to any meaningful Cliff headlines, but in the absence of the latter, could have a small, but detectable impact.

- Claims 350k vs 360k Consensus
- 4-week average lowest since March 2008
- Labor dept says Claims estimated in 19 states due to holiday

In the week ending December 22, the advance figure for seasonally adjusted initial claims was 350,000, a decrease of 12,000 from the previous week's revised figure of 362,000. The 4-week moving average was 356,750, a decrease of 11,250 from the previous week's revised average of 368,000.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 15, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 15 was 3,206,000, a decrease of 32,000 from the preceding week's revised level of 3,238,000. The 4-week moving average was 3,219,000, a decrease of 24,750 from the preceding week's revised average of 3,243,750.

Around noon, news hit that the House would reconvene...

Treasury yields and Stocks have continued a mostly downward trajectory following the morning's first major Fiscal Cliff headline from Harry Reid. Since then, there has been a small barrage of Cliffy rumors, but the lack of clarity has ultimately benefited bond markets.

Fannie 3.0 MBS continue to grind against the same 104-29 high that began at 11am, and positive reprices have started trickling in. As MBS continue to hold or improve upon these levels, reprices continue to be possible.

As for the Cliff headlines, Senator Scott Brown's Facebook page indicated that he'd "just learned the Pres. reached out to Senate GOP leadership with a proposal. It is the first such proposal to be put forth."

CNN added that Obama told Mitch McConnell that he'd send the Senate a scaled-back proposal, ostensibly corroborating Brown's Facebook page, but shortly thereafter, John Harwood (CNBC) said via Twitter:

"Sr. WH official tells me that, contrary to reports from Repubs, president will NOT be sending a fiscal cliff proposal to Capitol Hill."

Sneaky Fiscal Cliff headlines... coincidentally popping up within 1 minute of the 10am economic data. While the Consumer Confidence numbers were substantially weaker-than-expected, they weren't the culprit of the biggest surge in volume and volatility since last Friday. That honor was already reserved for the first Fiscal Cliff headline of the week.

In today's case, it's Senate Majority Leader Harry Reid saying that going over the Fiscal Cliff "Looks like where we're headed." Doesn't sound like much, perhaps, but it's the "first impression" for the last few days of Fiscal Cliff deal-making potential. Whether or not it's posturing or honest sentiment, we can't be sure, but it has certainly turned markets into a stirring creature for the first time this week.

Fannie 3.0s are up 6 ticks since the news, also up 6 ticks on the day at 104-28. 10yr yields dropped from 1.755 to 1.722 in short order and S&P's are off a quick 8-9 points.

For most lenders, this is too early in the day for a positive reprice, not to mention too emotional a move. There's an outside possibility for positive reprices among lenders who priced before 10am IF current gains demonstrate firm staying power. Still too early to assume that will be the case. The more important point is this: we have our first market-moving headline of the week and negative reprice risk is non-existent at the moment.

- Headline Confidence down to 65.1 vs 70.0 forecast
- Previous month revised to 71.5 from 73.7
- "Present Situation" ROSE to 62.8 from 57.4
- "Expectations" FELL sharply to 66.5 from 80.9
- Previous Month's "Expectations" revised down from 85.1
- "Present situation" highest since August 2008
- "Expectations" Lowest Since Nov 2011

- 377k vs 378k Consensus
- Highest Since April 2010
- 4.7 Months Supply vs 4.9 Previously

Sales of new single-family houses in November 2012 were at a seasonally adjusted annual rate of 377,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.4 percent (±16.8%)* above the revised October rate of 361,000 and is 15.3 percent (±18.7%)* above the November 2011 estimate of 327,000.

The median sales price of new houses sold in November 2012 was $246,200; the average sales price was $299,700. The seasonally adjusted estimate of new houses for sale at the end of November was 149,000. This represents a supply of 4.7 months at the current sales rate.

In the absence of meaningful inspiration, Treasuries drifted inconsequentially higher in yield overnight. The weakest levels were seen just before the domestic open and perfectly matched yesterday's overnight yield highs at 1.783 in 10yr Notes. Both Treasuries and MBS were already recovering by the time 8am rolled around, and were already bouncing by the time the slightly stronger-than-expected Jobless Claims data printed at 8:30am.

In other words, the Claims data didn't "stop a rally." Not only did the Labor Department note that Claims were estimated in 19 states due to the holiday, but this simply isn't the data that markets are looking for. Indeed it's time again for everyone's favorite holiday game: Fiscal Cliff headline potential!

Political leaders are back in Washington today and it just wouldn't be late December 2012 if we couldn't look forward to SOMETHING being said to inform markets' collective level of hope that a Fiscal Cliff deal--even if merely a stop-gap--is achievable before the New Year. This eventuality should be good for the most concerted movement of the week, provided that it's not one of those foregone conclusion-type headlines.
,br/> Nothing to report on that front, yet, and more expectation than guarantee that we'll even get anything actionable (but it would seem like a violation of common courtesy for Congress and the President to be back at work today without tossing at least a nugget or two toward the begrudgingly eager audience).

Until then, bond market trading seems predisposed to more of a sideways grind than a directional mission. MBS just ticked into positive territory for the first time this morning (104-23 in Fannie 3.0s), after having been as low as 104-19 earlier. 10yr yields are close to their lowest levels of the morning, currently trying to break lower past 1.765. Stocks are similarly trying to break their lows of the morning with the analogous level for S&P futures being 1415.

The next scheduled data of the morning will be the Consumer Confidence report at 10am followed by scheduled Fed Twist buying from 10:15 to 11:00am. Neither of these hold a candle to any meaningful Cliff headlines, but in the absence of the latter, could have a small, but detectable impact.

- Claims 350k vs 360k Consensus
- 4-week average lowest since March 2008
- Labor dept says Claims estimated in 19 states due to holiday

In the week ending December 22, the advance figure for seasonally adjusted initial claims was 350,000, a decrease of 12,000 from the previous week's revised figure of 362,000. The 4-week moving average was 356,750, a decrease of 11,250 from the previous week's revised average of 368,000.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 15, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 15 was 3,206,000, a decrease of 32,000 from the preceding week's revised level of 3,238,000. The 4-week moving average was 3,219,000, a decrease of 24,750 from the preceding week's revised average of 3,243,750.

- Headline Confidence down to 65.1 vs 70.0 forecast
- Previous month revised to 71.5 from 73.7
- "Present Situation" ROSE to 62.8 from 57.4
- "Expectations" FELL sharply to 66.5 from 80.9
- Previous Month's "Expectations" revised down from 85.1
- "Present situation" highest since August 2008
- "Expectations" Lowest Since Nov 2011

- 377k vs 378k Consensus
- Highest Since April 2010
- 4.7 Months Supply vs 4.9 Previously

Sales of new single-family houses in November 2012 were at a seasonally adjusted annual rate of 377,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.4 percent (±16.8%)* above the revised October rate of 361,000 and is 15.3 percent (±18.7%)* above the November 2011 estimate of 327,000.

The median sales price of new houses sold in November 2012 was $246,200; the average sales price was $299,700. The seasonally adjusted estimate of new houses for sale at the end of November was 149,000. This represents a supply of 4.7 months at the current sales rate.

- Claims 350k vs 360k Consensus
- 4-week average lowest since March 2008
- Labor dept says Claims estimated in 19 states due to holiday

In the week ending December 22, the advance figure for seasonally adjusted initial claims was 350,000, a decrease of 12,000 from the previous week's revised figure of 362,000. The 4-week moving average was 356,750, a decrease of 11,250 from the previous week's revised average of 368,000.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 15, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 15 was 3,206,000, a decrease of 32,000 from the preceding week's revised level of 3,238,000. The 4-week moving average was 3,219,000, a decrease of 24,750 from the preceding week's revised average of 3,243,750.