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Better than expected Non-Farm-Payrolls number... Fairly sizeable sell-off earlier in the day (though possibly stabilizing now)... Given that we mentioned both MBS and Treasuries as being at the weaker limits of their recent ranges yesterday, it's fair to assume that those trends would be at risk of breaking with today's sell-off. But remember that there are two components to the breaking of a trend: the "test" and the "confirmation." In the test phase, we see the the charted security provide a signal...

Things began in pretty ugly fashion this morning. MBS came in the door weaker than yesterday and fell further after the Jobless Claims data. At that point, Fannie 3.5's were actually below the lower line of their long standing trend channel. In technical analysis jargon, that would constitute a "test." But as you can see in the chart below, the test was rejected and MBS moved back into the trend channel. And what's more, as if to confirm that the trendline we're watching is indeed important, prices...

I'm just as hopeful as the next guy that stocks DO break lower and the 10yr DOES re-test 3.5 and the 4.5 DOES spend some more time in the 101's. All I'm advocating is PATIENCE on CHANGING HOW YOU MANAGE YOUR PIPELINE until such a time as old trends are broken and we stand a better chance of heading back there than not. In the context of recent months and even during several time periods in 09, that means a predisposition toward locking (assuming rate sheets are reflecting gains somewhat), while we're at these levels. At the very least, extreme vigilance for changes or obvious signs of adherence to the range is in order....

RATES ARE MOVING HIGHER IN A HURRY THIS MORNING. The 10yr TSY note is -0-19 at 99-30 yielding 3.384%...This is a function of the market finding it's way back to pre-Dubai levels, where price action was moving rates to the right in a range between 3.31% and 3.42%. Add in some profit taking, which is an expected "window dressing event, and an attempt to price in upcoming TSY supply concessions while balancing your NFP outlook...and you get higher rates ...call it repricing for the worse in the benchmark rates market.MORTGAGE RATES WILL BE HIGHER THIS MORNING...

Today has been unique. In recent weeks, rallies have taken us outside well-established trading ranges, but always with mitigating caveats or forthcoming important data that have called the continuation into question. This has even been the case during the most recent bullish price movement beginning on the 20th of September. Either resistance was not broken significantly enough or a data event, such as FOMC announcement, was coming up quickly enough for us to place expectations of continued improvements or merely for the holding of the new range on hold until more information became available....

Maybe the markets will find some sort of impetus to get directional tomorrow, but so far this week, Monday's extension of Friday's rally merely set us up to bounce back and forth within a range as we wait for all the shoes to drop. Sure, shoes have BEEN dropping already this week, but for every right-footed variety, a lefty surely follows. Case in point: AM data over the last two days, one data set gives the markets and excuse to move down in price (bond markets anyway), and the next provides just as convincing a reason to move back up (if not higher). 10+ tick swings have been the morning coffee both today and yesterday. But in both cases, closing prices were little changed from the open... Makes one wonder if any of the week's preceding data would be enough to move positions to far from "the ready" until NFP, Month End and Quarter End pass... Unless something crazy happens tomorrow, we probably won't get a chance to test that theory, thus making today's closing commentary echo with the ring of our recent ramblings... And though it may not be "all about Quarter End and NFP," it's all about quarter-end and NFP......

Lenders will likely be defensive ahead of tomorrow's job data/long weekend ahead/market going back to work (summer session almost over!!!). Dont be surprised to see less then expected rebates on rate sheets....still near summer rate lows though!...

The Week Ahead... Supportive time of month for MBS. Massive index extension means increased demand for longer life MBS (RATE SHEET INFLUENTIAL). Implied volatility generally lower ahead of NFP. Prepayment reinvestments. Regardless of supportive events...if benchmark prices are lower, MBS prices will be lower and mortgage rates will increase. (Supportive events may help MBS outperform TSYs yield spread-wise). No TSY supply = helpful. More Seasonal Slowness, more choppy price action ...