Thinner trading volumes in the afternoon have given...

Fannie 3.0s are back in line with prices that prevailed...

While it doesn't necessarily feel safe to hope for any sort of inspiring rally this morning, bond markets have at least held their ground for now.

After weakening at a quick pace for the duration of Friday's session, Monday's overnight trading was only moderately unfriendly by comparison with 10yr yields drifting a bp or two higher by the domestic open. A stronger-than-expected Durable Goods report launched 10's above 2% for the first time since April 2012 and took Fannie 3.0 MBS to 103-00.

The weakest levels were seen just ahead of the opening bell for equities where futures had already apparently topped out after a moderately positive response to Durable Goods. Stocks have generally been falling since then, with S&P futures off 7 points from their pre-open highs.

A weaker-than-expected Pending Home Sales report added to the negative momentum for stocks, but disconcertingly, bond markets haven't been as interested in responding. There's an ominous short term inflection point at 1.97 in 10yr yields, and we have yet to even attempt a break below.

Analogous levels in 3.0 MBS would be 103-09 to 103-10. We're somewhat closer to a test on both sides of the market with 10's at 1.9739 and Fannie 3.0s currently at 103-08. From there, the next pivot points lie at Friday's outer limits of 1.9523 and 103-12 respectively.

- Pending Sales -4.3 vs +0.3 consensus

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, fell 4.3 percent to 101.7 in December from 106.3 in November but is 6.9 percent higher than December 2011 when it was 95.1. The data reflect contracts but not closings.

Lawrence Yun , NAR chief economist, said there is an uneven uptrend. "The supply limitation appears to be the main factor holding back contract signings in the past month. Still, contract activity has risen for 20 straight months on a year-over-year basis," he said. "Buyer interest remains solid, as evidenced by a separate Realtor survey which shows that buyer foot traffic is easily outpacing seller traffic."

- Headline Durable Goods Orders +4.6 vs +1.8 Consensus
- Excluding Transportation +1.3 vs +0.7 Consensus
- Market reaction: bond markets didn't wait long before giving up. 10r yields hit their highest levels since April 26th and MBS fell a quick 4 ticks from 103-10 to 103-06, bringing the total losses to 9 ticks on the day.

New orders for manufactured durable goods in December increased $10.0 billion or 4.6 percent to $230.7 billion, the U.S. Census Bureau announced today. This increase, up seven of the last eight months, followed a 0.7 percent November increase. Excluding transportation, new orders increased 1.3 percent. Excluding defense, new orders increased 1.2 percent.

Transportation equipment, up following two consecutive monthly decreases, had the largest increase, $8.1 billion or 11.9 percent to $75.9 billion.

Thinner trading volumes in the afternoon have given...

Fannie 3.0s are back in line with prices that prevailed...

While it doesn't necessarily feel safe to hope for any sort of inspiring rally this morning, bond markets have at least held their ground for now.

After weakening at a quick pace for the duration of Friday's session, Monday's overnight trading was only moderately unfriendly by comparison with 10yr yields drifting a bp or two higher by the domestic open. A stronger-than-expected Durable Goods report launched 10's above 2% for the first time since April 2012 and took Fannie 3.0 MBS to 103-00.

The weakest levels were seen just ahead of the opening bell for equities where futures had already apparently topped out after a moderately positive response to Durable Goods. Stocks have generally been falling since then, with S&P futures off 7 points from their pre-open highs.

A weaker-than-expected Pending Home Sales report added to the negative momentum for stocks, but disconcertingly, bond markets haven't been as interested in responding. There's an ominous short term inflection point at 1.97 in 10yr yields, and we have yet to even attempt a break below.

Analogous levels in 3.0 MBS would be 103-09 to 103-10. We're somewhat closer to a test on both sides of the market with 10's at 1.9739 and Fannie 3.0s currently at 103-08. From there, the next pivot points lie at Friday's outer limits of 1.9523 and 103-12 respectively.

- Pending Sales -4.3 vs +0.3 consensus

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, fell 4.3 percent to 101.7 in December from 106.3 in November but is 6.9 percent higher than December 2011 when it was 95.1. The data reflect contracts but not closings.

Lawrence Yun , NAR chief economist, said there is an uneven uptrend. "The supply limitation appears to be the main factor holding back contract signings in the past month. Still, contract activity has risen for 20 straight months on a year-over-year basis," he said. "Buyer interest remains solid, as evidenced by a separate Realtor survey which shows that buyer foot traffic is easily outpacing seller traffic."

- Headline Durable Goods Orders +4.6 vs +1.8 Consensus
- Excluding Transportation +1.3 vs +0.7 Consensus
- Market reaction: bond markets didn't wait long before giving up. 10r yields hit their highest levels since April 26th and MBS fell a quick 4 ticks from 103-10 to 103-06, bringing the total losses to 9 ticks on the day.

New orders for manufactured durable goods in December increased $10.0 billion or 4.6 percent to $230.7 billion, the U.S. Census Bureau announced today. This increase, up seven of the last eight months, followed a 0.7 percent November increase. Excluding transportation, new orders increased 1.3 percent. Excluding defense, new orders increased 1.2 percent.

Transportation equipment, up following two consecutive monthly decreases, had the largest increase, $8.1 billion or 11.9 percent to $75.9 billion.

- Pending Sales -4.3 vs +0.3 consensus

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, fell 4.3 percent to 101.7 in December from 106.3 in November but is 6.9 percent higher than December 2011 when it was 95.1. The data reflect contracts but not closings.

Lawrence Yun , NAR chief economist, said there is an uneven uptrend. "The supply limitation appears to be the main factor holding back contract signings in the past month. Still, contract activity has risen for 20 straight months on a year-over-year basis," he said. "Buyer interest remains solid, as evidenced by a separate Realtor survey which shows that buyer foot traffic is easily outpacing seller traffic."

- Headline Durable Goods Orders +4.6 vs +1.8 Consensus
- Excluding Transportation +1.3 vs +0.7 Consensus
- Market reaction: bond markets didn't wait long before giving up. 10r yields hit their highest levels since April 26th and MBS fell a quick 4 ticks from 103-10 to 103-06, bringing the total losses to 9 ticks on the day.

New orders for manufactured durable goods in December increased $10.0 billion or 4.6 percent to $230.7 billion, the U.S. Census Bureau announced today. This increase, up seven of the last eight months, followed a 0.7 percent November increase. Excluding transportation, new orders increased 1.3 percent. Excluding defense, new orders increased 1.2 percent.

Transportation equipment, up following two consecutive monthly decreases, had the largest increase, $8.1 billion or 11.9 percent to $75.9 billion.