Fannie 4.0s have added another 2 ticks (104-13) since the last update owing to general bond market positivity after the 7yr Auction, and MBS-specific outperformance.  To be fair and accurate, the outperformance (MBS green while Treasuries are still red) was already intact heading into the auction, so it's not adding anything new at this point, but neither has it reversed course.

Several positive reprices have been reported and they remain a possibility while current levels are maintained or improved upon.

There were a few Ukraine-related headlines immediately following the auction, but they don't look to have had much of an impact.  The auction itself was nothing to write home about, but bond markets look like they were simply a bit defensive heading into the supply and have let their guard down to some small extent.  Failure to break higher in stocks (highs of the day at 11:40am) further supported the bond market resilience.

Treasuries were slightly weaker overnight, holding flat during Asian market hours and rising in yield during the European session.  The 8:30am economic data hasn't helped.

Even though Jobless Claims were higher than expected, markets are focusing more on the big beat in Durable Goods as well as a drop in the level of ongoing jobless claims (the headline number is just "initial claims."  Here's a breakdown of both:

Jobless Claims

• 329k vs 310k forecast
• Continued Claims 2.68 mln vs 2.75 mln forecast
• Thoughts on share of market movement: 5/10.  If we break this down by Initial vs Continued Claims, the focus is more on the latter, which is negative for bond markets, though the rise in the former may be acting to restrain bigger selling pressure.  Even then, some of the rise in the initial number is being chalked up to the holiday week, which doesn't make much sense, but is being talked about nonetheless.

Durable Goods

• +2.6 in March vs +2.0 forecast
• Biggest rise since November
• Excluding Transportation +2.0, biggest rise since January 2013
• Thoughts on share of market movement: 5/10. The combination of a strong Durables report and the drop in continued claims makes for a 'two against one' fight against a Jobless Claims headline that's not excessively weak to begin with.  The selling makes sense and the silver lining is that market movement is at least connecting more directly with economic data.

So far, 10yr yields are up 4bps at 2.724.  That's 12 ticks in terms of price.  MBS, meanwhile, are only down 3 ticks so far with Fannie 4.0s at 104-05.  There is no other significant data this morning, but Treasury auctions wrap up this afternoon with 7yr Notes at 1pm.

The first two days of the week were 'abnormal.'  It's not that they were particularly strange in any alarming way, just that a few of the more common ingredients in the average bond market recipe were missing.  Certainly, volume and participation were the most notable absences, not to mention outright movement (because there wasn't much movement).  We also saw a noticeable breakdown in the recently strong correlation between stock prices and bond yields.

All that changed overnight and into this morning.  The overnight session saw sensible connections between global economic data and bond market movement.  Weaker data in the Asian session made for a slight boost and stronger data in the European session, a slight detraction.  The net effect was positive for Treasuries overnight, with 10yr yields hitting the domestic session about 2bps lower.

MBS walked in the door about 2/32nds higher in price and gained another tick since then.  The stock lever has been well connected based on futures trading, so the next major potential for movement is coming up just before and after the 6:30am cash open for stocks.  After that, the first and only significant economic data of the day is out at 10am with New Home Sales.

Bond markets are at their best levels of the day, though there's not really an interesting story as to how they got there.  Reason being: they haven't moved much at all today, with the exception of noticeable ebbs and flows just after 9am and then coming the other way heading into Noon.  Rather than create any new movement, these flows ended in a wash, suggesting possible corporate rate lock hedging (companies selling Treasuries in order to lock in their funding costs between the time their corporate debt offering is priced and when it is fully subscribed--at which point the Treasuries are bought back).

From the morning lows, Fannie 4.0s and 3.5s are up 4-5 ticks, which is technically enough for any lender pricing during those lows (or close to them) to consider a positive reprice. 

The week continues to suffer from a lack of participation and excitement (not that excitement is always what we'd want to see when it comes to rates).  Although market participants returned from holiday breaks in Asia and Europe, it didn't do a whole lot to reveal any directional biases.

Case in point, Treasuries were insignificantly stronger, then weaker overnight and have been hovering around unchanged levels since the domestic session began.  MBS opened a few ticks weaker and gained them back in the first hour.  Fannie 4.0s are 1 tick from unchanged and 3.5s are 2 ticks weaker.

The only significant economic data of the day is Existing Home Sales at 10am.  Normally, it would make some sense to point out that it's earnings season and uninspired bond markets might take cues from stocks, but so far, the stock lever has been fairly disconnected.

Bond markets including MBS are closed for the Good Friday holiday.  Banks are open.  As such, some lenders may issue rate sheets, but past precedent suggests they'll be in line with yesterday's or otherwise conservative.  With no MBS trading, no reprice risk is expected.

Treasuries were mostly flat overnight until about 7am Eastern time.  From there yields rose slowly, along with stock prices, moving from 2.63 to 2.65 ahead of the morning's first economic data: weekly Jobless Claims.

The data was stronger than expected:

• 304k claims vs 314k forecast
• Previous week revised to 302k from 300k
• Continued Claims 2.739 mln vs 2.795 mln forecast

Bond markets weakened another few ticks after this data with 10yr yields briefly touching 2.66 just now (2.659 currently) and Fannie 4.0s down 5 ticks at 104-09. 

The only other significant data this morning arrives at 10am with the Philly Fed Index.  Then bond markets close early at 2pm ahead of tomorrow's full closer for Good Friday.  Participation should trail off rapidly by noon.