Fans of scheduled economic data rejoice! Life truly begins for you tomorrow as the morning session is packed with FOUR reports, and meaningful ones at that. Well... We'll see how meaningful they turn out to be in juxtaposition to Treasury Auctions, Bernanke Testimony, and ongoing headline possibilities out of Europe. But that's half the fun, right?! How much of an impact will the econ have versus "other stuff?" The answer will suggest how much energy we spend in anticipation of Friday's similarly packed econ schedule. Tomorrow's reports are threefold at 830am with the Producer Price Index, Retail Sales, and Jobless Claims. Then Business Inventories will print at 10am. Bernanke begins day two of testimony at the same time, with potential for unscripted comments over the next hour and change. Ben will pass the baton of market moving potential to the 30yr auction--the last of the week. The following link covers all this and more, including forecast levels. Check it out:

Earlier, we noted "a fairly clear argument in favor of resistance to further improvements through the 3pm close, although after hours lack of liquidity brings more uncertainty." And let's be honest... We couldn't miss such a great opportunity to point out how awesome that call was, as 2.89 held up into 3pm but has since given way in the first few minutes of the after hours session. It coincides with a break above 101-00 for MBS, though admittedly, they'd crept slightly into the 101's even before the 3pm close. Regardless of the relatively inconsequential self-aggrandizement, the implication is the same.... Reprices for the better have been seen in increasing numbers and continue to be likely at these levels.

Ongoing comments from Fisher exhibit more of the same hawkish attitudes we've come to know and love. The Dallas Fed President added that he won't support any further monetary accommodation, saying he doesn't see the benefit even if the economy were to weaken further. "I do not personally see the benefit of more monetary accommodation even if the economy weakens further. Because again, there's so much liquidity out there, what's the trigger to put it to work?" Fisher also acknowledged the current differences of opinion among FOMC voters as to the next policy steps, but the FOMC will put them on the table and make a decision .

After dipping below 2.90 in the recent post auction rally, 10yr notes are showing signs of having encountered resistance to further gains, both in terms of how yields have moved as well as the volume surrounding those moves. We've seen several "bounces" at 2.89 to 2.893 with a slight uptick in volume relative to adjacent trading. That's a fairly clear argument in favor of resistance to further improvements through the 3pm close, although after hours lack of liquidity brings more uncertainty. The bounce in 10yr notes has correlated with a level of 101-00 for Fannie 4.0's. Given that MBS has already been outperforming Treasuries today, it's unlikely 4.0's will go any higher unless 10yr notes break their 2.89-ish resistance. Reprices for the worse? No... Simply an update as to the deceleration of the post auction rally.

(Reuters) - The U.S. economy is poised to grow at an "accelerating clip," thanks to the Federal Reserve's super-easy monetary policy, and the central bank should not try to do more, a top Fed official said on Wednesday. "I firmly believe that the Federal Reserve has already pressed the limits of monetary policy," Dallas Fed President Richard Fisher said in remarks prepared for delivery to the Rotary Club of Dallas. "U.S. banks and businesses are awash in liquidity. Adding more is not the answer to our problems." For the economy to really gain strength, he said, Congress must resolve the long-term U.S. debt and deficit problems and remove uncertainty for U.S. businesses, he said. Fisher, who votes on the Fed policy-setting panel this year, said he expects growth to pick up to between 3 and 4 percent this year. The U.S. grew a tepid 1.9 percent pace in the first quarter. "There is plenty of potential for the economy to move forward at an accelerating clip," Fisher said, noting that many of the headwinds that hurt the economy in the first half, including fallout from the earthquake in Japan, are receding. "This is especially the case now that the Fed has reliquified the economy." Fisher reiterated his concern that faster growth, coupled with easy monetary policy, could fuel unwanted inflation. The Fed's preferred measure of inflation, the core personal consumption expenditures price index, rose 1.2 percent in the 12 months through May, the largest increase since August 2009. Though the level is still well below the Fed's informal 2 percent target for inflation, Fisher said he was watching closely. "If I see inflation continuing to rise and, most importantly, inflationary expectations beginning to spread, I will be the first out of the box to advocate the removal of the substantial monetary accommodation now in place," he said. (Reporting by Ann Saphir, Editing by Chizu Nomiyama)

Reprices for the better are an increasing possibility as bond markets react favorably to today's 10yr note auction. After a brief few moments of indecision before getting all the way to the best levels of the day, both 10yr notes and Fannie 4.0s are basically there now with the former at 2.906 vs a 2.899 low yield earlier today and MBS at 100-28+, matching their best levels this morning. If MBS stay here or move higher, reprices for the better get more and more likely with a few of the traditionally early acting lenders perhaps already in the process.

The 10yr Treasury Note auction was met with good demand, with 3.17 dollars bid for each dollar offered. As far as reopenings go, that's stronger than the average of the last 4 (3.06), but weaker than the last 4 refundings (3.34). Overall, very much in line with "healthy demand." The high yield at 2.918 was slightly stronger than the 2.932 when-issued yield at 1pm (when-issued or "WI" for short, can be thought of as the market's forward looking forecast of where it thinks the high yield will land). Indirect bidders were slightly lighter than average, 42% vs 52.4% of the last 8 auctions or 55.2% of the last 4 reopenings. Direct bidders again stepped up, taking 14% vs 7% average. These results would be received as "stronger" had it not been for the weaker 10yr trading this morning setting up a bit of a concession.

(Reuters) - Federal Reserve Chairman Ben Bernanke on Wednesday said the United States would keep paying interest on government debt if Congress failed to reach a deal to lift the debt ceiling by August 2. The central banker's comments offered the first public indication of how the Obama administration would prioritize its financial obligations after August 2, when the U.S. Treasury says the government would run out of money to pay all its bills. "The assumption is that as long as possible, the Treasury would want to try to make payments on the principal and interest to the government debt, because failure to do that would certainly throw the financial system into enormous disarray and have major impacts on the global economy," Bernanke said. Bernanke confirmed for the first time that the Obama administration is making contingency plans in case the debt talks fail to produce a deal. He said its top priority was to ensure that holders of U.S. bonds were paid on time. However, prioritizing the debt would mean ordinary Americans would suffer. "As a matter of arithmetic, fairly soon after that date there would have to be significant cuts in Social Security, Medicare, military pay or some combination of those in order to avoid borrowing more money," Bernanke said, focusing on areas that could affect key voting blocs ahead of 2012 elections. "If, in fact, we ended up defaulting up the debt -- or even if we didn't ... it's possible that simply defaulting on our obligations to our citizens might be enough to create a downgrade in credit ratings and higher interest rates for us, which would be counterproductive of course because that makes the deficit worse," he said.