FED'S FISHER - US HAS INFLATIONARY FORCES WORKING ON IT DESPITE HIGH UNEMPLOYMENT *FISHER - JAPAN DISASTERS A SHORT TO MEDIUM TERM "DISTRACTION" FOR U.S. ECONOMY, NOT LIKELY A LASTING NEGATIVE IMPACT * FED'S LOCKHART - LOOKS LIKE Q1 GROWTH WILL COME IN SOFT RELATIVE TO WHAT WAS EXPECTED * LOCKHART - HIGHER OIL PRICES HAVE DAMPENED CONSUMER ACTIVITY, A CONCERN * LOCKHART - WOULDN'T BE SURPRISED TO SEE ELEVATED OIL PRICES FOR SOME TIME * LOCKHART - ECONOMY APPEARS TO BE ABSORBING HIGHER COSTS OF OIL WITHOUT SEVERE REACTION * LOCKHART - AT OIL PRICES OF $150 HIGHER, COULD HAVE A RECESSIONARY EFFECT * FISHER - HIGHER OIL PRICES COULD HAVE INFLATIONARY EFFECT AS WELL

FNCL 4.5's are not 1 tick up on the day at 101-29. The ongoing moderation of MBS prices should alleviate any risks of reprices for the worse, as well as improve how rates come out this morning relative to where they otherwise might. 10yr notes are coming down for their 3rd test of 3.417 at the moment, a level that has provided resistance so far this morning.

(NYTIMES) -Two years after being on the verge of collapse, Citigroup squeezed out a $3 billion profit as it contended with a series of mortgage troubles and sluggish economic growth across the globe. While Citigroup topped analysts’ consensus estimates by a penny with earnings of 10 cents a share, its earnings fell 32 percent from the period a year earlier, when Citi reported earnings of 15 cents a share, or $4.4 billion. Citigroup’s earnings were dampened by the same factors that weighed on the results of Bank of America and JPMorgan Chase last week. Despite the solid performance of the Wall Street businesses and improvement in credit quality, its traditional banking businesses have been hit by foreclosure troubles, new financial regulations and a slowdown in home loan growth. Wells Fargo and several big regional players are expected to report similar challenges when they announce their results later this week. Citi’s results were buoyed by the release of $3.3 billion of reserves that had previously been set aside to cover credit card and other loan losses. The move helped offset deeper losses in its domestic mortgage unit and weaker trading and investment banking results.

WASHINGTON, April 18 (Reuters) - U.S. homebuilder sentiment slipped a notch in April as home prices continued to fall in most areas of the country amid widespread foreclosures, a survey released on Monday showed. The National Association of Home Builders/Wells Fargo Housing Market index fell to 16 from 17, leaving the index in the pessimist range for a full five years. A reading above 50 indicates that more builders view sales conditions as good than poor. The index has not been above 50 since April 2006. "The spring home buying season is getting off to a slow start due to persistent concerns about home values as more foreclosures seem to be hitting the market, increasingly restrictive lending requirements for home buyers and builders, and the slow pace of economic recovery," said David Crowe, the NAHB's chief economist. (Reporting Corbett B. Daly; Editing by Chizu Nomiyama)

After hitting a price of 101-21, FNCL 4.5 MBS have moderated to 101-28 as the knee-jerk down-swing wears off. 10yr benchmarks touched the mid 3.45's and have also moderated to 3.434. However, this is not a guarantee that the moderation will continue. Unfortunately, 10's stopped to bounce at 3.42 both on the way higher and during the moderation, letting us know this technical level is still in play. In fact, 3.42 marked a bounce as yields recovered, so it is one of the better resistance targets for now. S&P's bounced at 1299.50 just after the open.

If you had rates already before the S&P news hit just after 9am, expect reprices for the worse as FNCL 4.5's are down just over 10 ticks peak to trough, currently at 101-22. 10yr notes are up to 3.445 and have still been a moving target as more and more "snippets" are released. If you don't have rates yet today, rate sheets should be weaker than Friday afternoon's offering. It's not yet clear how this news will ultimately affect where markets will be later today.

Today 09:03 - S&P AFFIRMS RTGS ON UNITED STATES; OUTLOOK REVISED TO NEGATIVE - Treasury yields moved sharply higher on the downgrade relative to the morning's action. 10's are currently a moving target around 3.413.

Stock futures and TSY yields fell in the Asian and European sessions, bringing the 10yr yield as low as 3.367. It then rose to 3.387, where it seems to have met slight resistance, moderating down to 3.38. MBS opened slightly stronger with FNCL 4.5's up 2 ticks currently at 101-30. Markets have done little by way of response to what is arguably the most prominent domestic headline: CITI Earnings. Earnings per share came in at 10 cents vs a 9 cents estimate. Q1 revenue was down 22% to $19.7 bln vs estimates of $20.55 bln. The lone data item on the economic calendar comes in the form of NAHB's Housing Market Index today at 10am.