Just a quick note by way of addendum to the last alert (which left the MBS outlook in somewhat equivocal territory due to moderate weakness and illiquid conditions). As we were hoping, Treasuries indeed turned out to be the place to look for cues that the MBS weakness was merely liquidity-driven. 10's held the ceiling that had been forming at the time and MBS are 2-4 ticks higher since then, bringing Fannie 3.0s back to 103-16. this alleviates any potentially increasing reprice risk from earlier.

Helping Treasuries reinforce the bounce was the stock lever that's been well-connected today and the lowest closing prices in S&P's in more than a week. S&P's broke their intraday support just before the 1pm close of 1491.75. 10yr yields are currently at 1.96, not quite back to their intraday lows.

Fannie 3.0s trading has been choppy and sparse surrounding...

If bond markets were to close right now, 10yr yields...

Today's permanent open market operation (aka: POMO) for the NY Fed is in the very relevant 7-9 year maturity range (originally 10yr Notes). All too often, the 11:00am conclusion of POMO leads to at least a modicum of volatility in bond markets and sometimes an outright reversal.

Both 10's and MBS look to be hitting their best levels of the day right at the POMO conclusion, and right as the 10yr approaches the well traveled pivot at 1.97. We'd expect some measure of resistance here anyway, but are on guard for it being more pronounced due to the timing. Fannie 3.0s are currently up 12 ticks at their own important short term inflection point at 103-16.

- Factory Orders +1.8 vs +2.2 Consensus
- December Durable Orders Revised to 4.3 from 4.6
- Market Reaction: none

New orders for manufactured goods in December, up three of the last four months, increased $8.6 billion or 1.8 percent to $484.8 billion, the U.S. Census Bureau reported today. This followed a 0.3 percent November decrease. Excluding transportation, new orders increased 0.2 percent.

Shipments, up five of the last six months, increased $1.8 billion or 0.4 percent to $484.9 billion. This followed a 0.3 percent November increase.

Unfilled orders, up six of the last seven months, increased $7.9 billion or 0.8 percent to $991.7 billion. This followed a slight November increase. The unfilled orders-to-shipments ratio was 6.12, down from 6.13 in November.

Inventories, up following two consecutive monthly decreases, increased $0.5 billion or 0.1 percent to $615.5 billion. This followed a slight November decrease. The inventories-to-shipments ratio was 1.27, unchanged from November

Bond markets traded in weaker territory for the entirety of the overnight session with 10's creeping as high as 2.059 after a block trade of 10yr Futures at 4:22am. But a negative earnings surprise from Commerzbank and widening EU peripheral spreads helped German Bunds begin to ratchet to lower yields with Treasuries following reluctantly.

As domestic market participants began trading, block trades arrived on the other side of the table with the biggest 10yr ticket just before 8:20am. That helped extend a "risk-off" trade that was already underway with equities and Treasury yields both moving down relatively briskly into the 8am hour.

MBS are noticeably appreciative of benchmark yields' attempts to hold below Friday's highs with Fannie 3.0s up 9 ticks at 103-14, their session highs. The stock lever has been well connected and post-opening-bell, has given some pause to the morning Treasury/MBS rally. Amid light econ data (just Factory Orders coming up at 10am), further stock/bond connectivity is a strong possibility.

Just a quick note by way of addendum to the last alert (which left the MBS outlook in somewhat equivocal territory due to moderate weakness and illiquid conditions). As we were hoping, Treasuries indeed turned out to be the place to look for cues that the MBS weakness was merely liquidity-driven. 10's held the ceiling that had been forming at the time and MBS are 2-4 ticks higher since then, bringing Fannie 3.0s back to 103-16. this alleviates any potentially increasing reprice risk from earlier.

Helping Treasuries reinforce the bounce was the stock lever that's been well-connected today and the lowest closing prices in S&P's in more than a week. S&P's broke their intraday support just before the 1pm close of 1491.75. 10yr yields are currently at 1.96, not quite back to their intraday lows.

Fannie 3.0s trading has been choppy and sparse surrounding...

If bond markets were to close right now, 10yr yields...

Today's permanent open market operation (aka: POMO) for the NY Fed is in the very relevant 7-9 year maturity range (originally 10yr Notes). All too often, the 11:00am conclusion of POMO leads to at least a modicum of volatility in bond markets and sometimes an outright reversal.

Both 10's and MBS look to be hitting their best levels of the day right at the POMO conclusion, and right as the 10yr approaches the well traveled pivot at 1.97. We'd expect some measure of resistance here anyway, but are on guard for it being more pronounced due to the timing. Fannie 3.0s are currently up 12 ticks at their own important short term inflection point at 103-16.

- Factory Orders +1.8 vs +2.2 Consensus
- December Durable Orders Revised to 4.3 from 4.6
- Market Reaction: none

New orders for manufactured goods in December, up three of the last four months, increased $8.6 billion or 1.8 percent to $484.8 billion, the U.S. Census Bureau reported today. This followed a 0.3 percent November decrease. Excluding transportation, new orders increased 0.2 percent.

Shipments, up five of the last six months, increased $1.8 billion or 0.4 percent to $484.9 billion. This followed a 0.3 percent November increase.

Unfilled orders, up six of the last seven months, increased $7.9 billion or 0.8 percent to $991.7 billion. This followed a slight November increase. The unfilled orders-to-shipments ratio was 6.12, down from 6.13 in November.

Inventories, up following two consecutive monthly decreases, increased $0.5 billion or 0.1 percent to $615.5 billion. This followed a slight November decrease. The inventories-to-shipments ratio was 1.27, unchanged from November

Bond markets traded in weaker territory for the entirety of the overnight session with 10's creeping as high as 2.059 after a block trade of 10yr Futures at 4:22am. But a negative earnings surprise from Commerzbank and widening EU peripheral spreads helped German Bunds begin to ratchet to lower yields with Treasuries following reluctantly.

As domestic market participants began trading, block trades arrived on the other side of the table with the biggest 10yr ticket just before 8:20am. That helped extend a "risk-off" trade that was already underway with equities and Treasury yields both moving down relatively briskly into the 8am hour.

MBS are noticeably appreciative of benchmark yields' attempts to hold below Friday's highs with Fannie 3.0s up 9 ticks at 103-14, their session highs. The stock lever has been well connected and post-opening-bell, has given some pause to the morning Treasury/MBS rally. Amid light econ data (just Factory Orders coming up at 10am), further stock/bond connectivity is a strong possibility.

- Factory Orders +1.8 vs +2.2 Consensus
- December Durable Orders Revised to 4.3 from 4.6
- Market Reaction: none

New orders for manufactured goods in December, up three of the last four months, increased $8.6 billion or 1.8 percent to $484.8 billion, the U.S. Census Bureau reported today. This followed a 0.3 percent November decrease. Excluding transportation, new orders increased 0.2 percent.

Shipments, up five of the last six months, increased $1.8 billion or 0.4 percent to $484.9 billion. This followed a 0.3 percent November increase.

Unfilled orders, up six of the last seven months, increased $7.9 billion or 0.8 percent to $991.7 billion. This followed a slight November increase. The unfilled orders-to-shipments ratio was 6.12, down from 6.13 in November.

Inventories, up following two consecutive monthly decreases, increased $0.5 billion or 0.1 percent to $615.5 billion. This followed a slight November decrease. The inventories-to-shipments ratio was 1.27, unchanged from November