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Risk trades were peeled off today and the bond market rallied. The directional move was more than welcome by bond bulls as it served to stave off an all-out bearish technical breakdown. The rates rally took shape in above-average overnight trading volumes following a series of bond supportive news headlines . Aiding the rates recovery was weakness in equities that sold off around the globe , leading a flight to safety into government bonds. This forced the yield curve flatter as fast money short...

My goal is to convey just how boring today was. The term "range-bound and waiting for guidance" doesn't even begin to describe it. "Low volatility and narrowing prices ahead of _ " barely comes close... No my friends... Today was a day that might as well not even have traded. It does do one thing for us though, which I suppose is useful, and that is to at least SPEAK TO, if not outright CONFIRM that what we saw on Friday afternoon was indeed a move to cash/sidelines in the late hours of the day, and not indicative of any material weakness in bonds. ...

The FN 4.0 is trading -0-04 at 99-09 yielding 4.084% and the FN 4.5 is bid -0-02 at 101-23 yielding 4.294%. The secondary market current coupon is 4.137%. The CC is +77/10yr TSY and +67/10yr swap. It has been a choppy day......

It is no secret that the most widely discussed topic of the week was: The Range Trade Our analysis relied upon the random price action of intraday momentum led drifts back and forth between high volume marks and technical pivot points. Occasionally, knee jerk price spikes led to a little ALERT drama, but for the most part...we know nothing new about the direction the market's BIG PICTURE bias is taking us. Economic data was taken well by some while others let their bearish side get the better of them. While the majority of earnings reports beat expectations, the downgrade of one BIG bank caused mid-week commotion in equities (WELLS). The Federal Reserve continued to test the waters of their eventually exit from the capital markets, starting with the exploration of a reverse repo program on Monday, ending with Bernanke TV time on Friday....with a little voter/non-voter Fed president rhetoric and a darker shade of Beige Book sandwiched in between too....

The FN 4.0 is trading -0-10 at 98-12 yielding 4.1681% and the FN 4.5 is -0-07 at 100-30 yielding 4.387%. The secondary market current coupon is 4.299%. In the primary mortgage market, even though a few lenders who priced early in the session have repriced for the better, rate sheet rebates are still worse than yesterday. If prices fall back to the intraday lows, the lenders who repriced rate sheets may take back the gains they offered in republished rate sheets. As for lenders who have not repriced today, or priced later in the day...a move back to the intraday low may warrant a rate sheet recall. The FN 4.5 would have to fall back towards 100-20 for this to happen, which would require the 10yr TSY yield to retest the 3.42% yield level....

Heading into the 5pm "RATE SHEETS ARE UNCHANGED" marking period, rate sheet influential MBS coupons have given back a portion of their early afternoon, yield curve driven price appreciations. The FN 4.0 is currently +0-11 at 98-25 yielding 4.1276% while the FN 4.5 is trading +0-09 at 101-06 yielding 4.356%. The secondary market current coupon is 4.2304%. ...

Positive progress has been made all morning in the rates market, however as traders start to search for the lunch cart...stocks are heading higher and benchmark Treasuries and MBS are suffering because of it. In the past 10 minutes the S&P hit an intraday high of 1076, the 10yr TSY note rose from 3.30% to 3.34%, and the FN 4.5 fell five ticks to 101-04. DONT PANIC...we are not in ALERT MODE yet, the previously discussed rates range is indeed moderating the market......

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......