We're watching CSPAN, waiting to see how the shutdown plays out. We think it goes into the weekend. Either way, finger pointing and bickering has hit a new low on the House floor.  We should be watching the Masters.....


MBSonMND: MBS MID-DAY
Open MBSonMND Dashboard
FNMA 3.5
93-06 : -0-07
FNMA 4.0
97-19 : -0-07
FNMA 4.5
101-06 : -0-06
FNMA 5.0
104-07 : -0-04
GNMA 3.5
94-09 : -0-07
GNMA 4.0
99-07 : -0-08
GNMA 4.5
102-20 : -0-06
GNMA 5.0
105-23 : -0-03
FHLMC 3.5
92-31 : -0-07
FHLMC 4.0
97-13 : -0-08
FHLMC 4.5
101-01 : -0-07
FHLMC 5.0
104-01 : -0-04
Pricing as of 11:01 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
10:53AM  :  Falling Stocks and Relentless Tepidity in TSY's
Any other day this week, a 6 point drop in S&P's would have coincided with better gains for Treasuries. Instead, it's just sideways and tepid as 10's continue to favor 3.59 (but nothing lower!). MBS have come off their lows of the morning, but similar to Treasuries, are encountering their own resistance. That's at 101-06 in FNCL 4.5's. Ugly day so far, with potentially negative short/mid term technical implications. Break and close above 3.60 feels like it would make 3.70 target re-testing a higher likelihood.
10:41AM  :  Wholesale Inventories as Expected, Unchanged
* FEB WHOLESALE SALES -0.8 PCT (CONSENSUS +1.8 PCT) VS JAN +3.3 PCT (PREV +3.5 PCT) * FEB SALES DROP FIRST DECLINE SINCE JUNE 2009, LARGEST SINCE MARCH 2009 (-3.0 PCT)
10:17AM  :  Highlights From Fed's Fisher
* FED MUST NOT MONETIZE, OR APPEAR TO MONETIZE, GOVERNMENT DEBT-FISHER * FISHER-FED RISKS COMPOUNDING INFLATIONARY PRESSURES IF IT FAILS TO WITHDRAW LIQUIDITY FAST ENOUGH * FISHER-CONTINUED ACCOMMODATION PRESENTS SIGNIFICANT RISKS, NO AMOUNT OF FURTHER ACCOMMODATION WOULD BE WISE * FED MUST NORMALIZE OPERATIONS IN A TIMELY WAY-FISHER * FISHER-U.S. MUST NOT RESORT TO SUSTAINED NEGATIVE REAL INTEREST RATES, INFLATION TO SOLVE FISCAL PROBLEMS
9:34AM  :  Wells Fargo cuts 1,900 jobs as refinancings slow
(Reuters) - Wells Fargo & Co (WFC.N) said on Thursday it is shedding about 1,900 jobs, or less than 1 percent of its total workforce, as mortgage refinancings slow. The San Francisco-based lender said notices went out March 23 giving the employees 60 days to find new jobs. Some will be reassigned in the company, spokesman Jason Menke said. A majority of the jobs were temporary, created last year when refinancings surged due to record-low interest rates. "They were hired during the last several months to assist us with application volumes," Menke said. "We had seen a significant increase in demand for mortgage refinancings throughout 2010." "Interest rates were favorable by historical standards," Menke said. "Interest rates have edged up a bit. That's part of it."
9:15AM  :  Highlights From Fed's Lockhart
* LOCKHART SAYS ECB MOVES DO NOT HAVE EFFECT ON POLICY POSTURE OF THE FED * LOCKHART SAYS DOES NOT SEE MAJOR EXPOSURE IN U.S. TO EUROPEAN PROBLEMS *** LOCKHART SAYS CONCERNED THAT TALKING IN DETAIL ABOUT EXIT STRATEGY AT TOO EARLY A STAGE COULD BE COUNTERPRODUCTIVE
9:10AM  :  MBS Prices Fall as Treasuries Sell in High Volume
While 10yr notes paid much respect to their 3.56 target yesterday (indeed, this will remain an important technical inflection point given several recent support bounces), it was ultimately broken in overnight trading and that break is being confirmed in medium volume so far this morning, or rather, it's at risk of being confirmed. The upside potential is that the hourly chart of 10's will look "not to bad" with respect to 3.56 as a support level if 10's manage to continue rallying this morning. That has been the trend so far as yields have come from 3.62 at 8:26am to 3.587 currently. However, the unpleasant potential is that we'd encounter yesterday's high yields as potential resistance now. The extent to which that pans out seems that it will be dependent to some extent, on the stock lever (so far, it's been to a "great extent"). Even this morning, TSYs finally put an end to the selling as stocks made their first "lower high." As far as MBS, though they're content to outperform TSYs into a sell-off, the overall weakness is more than enough to bring MBS lower, with FNCL 4.5's down 6 ticks so far this morning at 101-06. The only data on tap this morning comes at 10am with the Wholesale Trade Report.
8:56AM  :  No Agreement on Continuing Resolution. Rates on the Rise
Not much economic data on the calendar today. Investors are focusing on whether Republicans and Democrats can find a last-minute compromise on this year's budget and avoid a costly government shut-down. We don't see a short term spending bill reaching President Obama's desk today, meaning the government will likely shutdown at midnight, but we do anticipate a Continuing Resolution to be agreed upon by Monday morning. Even with a potential government shutdown looming, S&P 500 futures are 6.25 points higher at 1,334.75. The Nikkei jumped 1.85% after another earthquake shook the northeastern shore of Japan, killing two people and knocking out power to millions in the process. The stock lever has not been a supportive influence on the bond market lately. This relationship is all about the uncertainty that pervades markets amidst the deluge of economic data, headline news, geopolitical risk, budget battles, Fed Policy speculation, Treasury auction supply, and market technicals ...just to name a few. The benchmark 10-year yield backed up another five basis points to 3.60% last night. Trading volume on Globex was heavy into the price decline with over 300k 10s trading as of 8:25am. That is well-above average and indicative of liquidative selling. The long end of the yield curve led the move higher in rates. The 2s/10s curve is 2bps steeper at 278bps wide. The FNCL 4.5 is -8/32 at 101-04. Current coupon yield spreads are tighter but loan pricing is going to be worse this AM, barring a total turnaround in the next two hours. The real headline in this market should be oil trading over $110/barrel yesterday and breaking through $111 last night. NYMEX light crude is currently +1.21% at $111.63. Rising oil prices fuel our call for another leg lower in interest rates as Main Street America sees spending money squeezed into the summer months. Gold prices keep rising on inflationary concerns; overnight they rose 0.92% to $1,470.89.

Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
David Z.  :  "JTB, how is housing supposed to recover with rates increasing? Thats why i am still optimistic we will see some relief soon. We are no worse off than around this time last year. Housing is!"
JTB  :  "How am I supposed to do 100% refi business with rates increasing?"
Andrew Horowitz  :  "i am still trying to figure out why stocks are still rallying"
Matthew Graham  :  "I think the most bullish tactical trade was to buy the dip at 3.56 support"
Brett Boyke  :  "Citi's Stephan Englander - "The US budget debate is raising increasing concerns about foreign investors that there is no process that is likely to generate needed US fiscal reforms down the road (but note that this could explain USD weakness, but wouldn't be the first explanation for a global risk rally)." "
Adam Quinones  :  "aka think about covering shorts at 3.60!"
Adam Quinones  :  "TSY supply ahead!"
Adam Quinones  :  "we wouldnt be surprised by that Brent."
JTB  :  "So at quick glance this is likely to get worse before it gets better, no? We should anticipate a test of 3.7."
Victor Burek  :  "flag is .2 worse than yesterday"
Adam Quinones  :  "a few posts for perspective."
Adam Quinones  :  "there you go Brent."
Adam Quinones  :  "March 31, 2011 Last Day to Lock Before Originator Comp Rule Change: http://www.mortgagenewsdaily.com/mortgage_rates/blog/205460.aspx MG isolated a DJ report :IMF No Requests for Financial Assistance from Portugal as the only major news on the wires at the time of the MBS price dip. We don't think this was really the market's underlying motivation for the sudden change of direction, but we do know that soon after the headline hit there was a rush of short selling in the 10-yr TSY futures contrac"
Adam Quinones  :  "March 29, 2011 The Day Ahead: Home Prices, Consumer Confidence, QRM, Treasury Auction http://www.mortgagenewsdaily.com/mortgage_rates/blog/205012.aspx As a reminder, we view the latest run up in rates as being driven by a technical reversal from overbought levels followed by an auction concession driven "bid wanted" atmosphere where rates were left to drift higher with little push back from bargain buyers . While we respect the technical pressures that have been created by the directional drift,"
Adam Quinones  :  "March 25, 2011 Rate Techs: Key Support Broken. Auction Supply Ahead http://www.mortgagenewsdaily.com/mortgage_rates/blog/204642.aspx After stagnating near key inflection levels for what felt like an eternity, the 10 year Treasury note has broken through a cluster of support between 3.40 and 3.42%. This directional move started last week as a technically-driven upward drift from overbought levels (3.18%). A corrective winning streak for stocks combined with a steady trickle of hawkish Fed rhet"
Andrew Horowitz  :  "its a traders world yes, but the flight to safety is going to other commodities"
Adam Quinones  :  "March 24, 2011 Rate Techs: Inching Toward a Bearish Breakdown: http://www.mortgagenewsdaily.com/mortgage_rates/blog/204347.aspx If 10s failed to stick below 3.40%, trading technicals would lean in favor of the bear camp and a range trade between 3.40% and 3.70% would be on the table "
Adam Quinones  :  "MARCH 22…..2011 Event Exhaustion Leaves Bond Market Waiting for Guidance: http://www.mortgagenewsdaily.com/mortgage_rates/blog/203964.aspx On March 11th we wrote, "Lots of headlines to digest lately. What region is the market focused on again? North Africa, the Middle East, Spain, Portugal, Greece, China, Japan, the U.S.? What trade is the market working right now? Long Oil? Short Stocks? Long Gold? Short Bonds? Short the Dollar? Wait. What about economic fundamentals? Expansion? Contraction? I"
JTB  :  "MG or AQ..could you direct me to a post that give me a bit of perspective of where we are right now and where we might be going?"
Andrew Horowitz  :  "if we are having such a difficult time cutting 38 billion what is going to happen when we have to do the real heavy lifting"
Andrew Horowitz  :  "but i belieeve one of the reasons the bond market has been selling off this week is the budget issue"
Andrew Horowitz  :  "which is a political timebomb so go no further"
Andrew Horowitz  :  "again it comes down to one issue"
Matthew Graham  :  "sorry for the west coast time zones, these are from minutes ago: Today 07:05 - US SENATE DEMOCRATIC LEADER REID SAYS BUDGET FIGHT IS ABOUT WOMEN'S HEALTH ISSUES Today 07:06 - REID SAYS DEMOCRATS "NOT BENDING ON WOMENS HEALTH" Today 07:08 - REID SAYS ALL PROPOSED REPUBLICAN POLICY CHANGES EXCEPT PLANNED PARENTHOOD ARE RESOLVED Today 07:09 - REID SAYS DEMOCRATS, REPUBLICANS HAVE AGREED TO $38 BLN IN SPENDING CUTS IN BUDGET TALKS "
Adam Quinones  :  "bids getting "hit" = bad, offers getting "lifted" = good"
Adam Quinones  :  "trade log tells me 10s are still feeling the pressure of short sellers....bids getting hit at price lows still."