Fannie 4.0's hit the 3pm close on a technical shelf of sorts at 102-18. In fact, the 30 day chart looks pretty good there. Finally, the technical picture in stocks looks perhaps way uglier than bonds. Considering the extent to which bond yields and stock prices have been following each other recently, it's not out-of-bounds to think "what's bad for one is good for the other." That's not something to bank on by any means, but it is something nonetheless. Bottom line, there are two ways to look at today's losses, and we won't really know which way is the better way until we get some more info, starting with next week's action.

Without being too eloquent about it, today felt "real bad" from the mortgage market's point of view. Reprices were hefty. Does that mean that the good times are over? No way to tell yet. There are both scary and comforting things to consider when thinking about whether or not MBS prices will continue falling in the coming week. On the scary side, if we look simply at the shape of movement in bond markets, there's an ongoing sense that we began parabolically turning around yesterday. Using 10 yr notes as a bond market benchmark for a moment, there's definitely a 2 day pivot point at 2.52+ that looks scary. After breaking below there yesterday, it provided support on several occasions over the past two days before breaking this afternoon. But when we start to sprinkle in the ancillary considerations, things may not be so bleak. To wit, one of the supportive bounces came right after this morning's Jobs data, in some of the highest volume minutes of the year. Additionally, there is longer term, more important support slightly higher in yield that has still not come under fire. Those levels are in the lower 2.6's and we'll discuss them in greater detail if/when they become relevant. Then there's the volume situation in general: heavy in the morning, much lighter now. If we weight for volume, 10's actually held the supportive ceiling. We wouldn't go so far as to say that it's Friday afternoon and "who cares" about trading action after 12 noon on a Friday, but it's perhaps something to consider in the sense that "the morning mattered more." After all, everything looks nice and supportive in the bond markets until noon, with all the hell-breaking-loose reserved for the PM hours. Are there even people pushing these buttons? Or is everyone with a pulse wake-boarding and golfing?! Rise of the machines?! Ok ok ok... Not really, but it seems clear that we've at least moved towards that end of the "absent trader" spectrum.

(Reuters) - U.S. consumer credit shot up in June by $15.53 billion, according to a Federal Reserve report on Friday that showed consumers were willing to keep borrowing robustly in a tight job market. June's consumer credit surge was triple the $5.08-billion increase posted in May and eclipsed forecasts by Wall Street economists for a $5-billion rise. It was the biggest one-month gain in consumer credit in nearly four years, since a $17.29 billion jump in August 2007. (Reporting by Glenn Somerville, editing by Neil Stempleman)

(Reuters) - U.S. housing authorities said on Friday more needed to be done to help the market recover, as the Obama administration's foreclosure prevention program helped 31,620 homeowners win lower mortgage payments in June. The program provides financial incentives to servicers, which help borrowers rework their mortgages. So far it has helped 763,071 borrowers win permanent loan modifications, far fewer than the administration's initial goal of helping up to four million homeowners. Despite a slight improvement in home prices, the Department of Housing and Urban Development said there was much more work to do to help the housing market recover. (Reporting by Rachelle Younglai; Editing by James Dalgleish)

It could be that lenders are priced conservatively enough to overlook the ongoing weakening of MBS prices. What is more clear is that MBS and Treasuries are both making moves outside previous support and whatever the reprice outlook may have been 30 minutes ago, it's worse now. Fannie 4.0's are down 29 ticks on the day at 102-20 and 10's are all the way up to 2.554 now. Again, we're not sure if reprices for the worse are going to be a widespread phenomenon, but lenders would certainly be justified.

(Reuters) - The European Central Bank is demanding that Italian Prime Minister Silvio Berlusconi commit to fast-track specific welfare reforms and a constitutional amendment enshrining a fiscal rule before it will buy Italian bonds, sources close to the matter said on Friday. The sources, speaking on condition of anonymity because of the sensitivity of the issue, said the ECB had agreed in principle on Thursday to buy Italian and Spanish bonds if key structural reforms were brought forward. Berlusconi's office said he and Economy Minister Giulio Tremonti will hold a news conference at 1700 GMT, although it was not clear whether he will make an announcement along those lines. One source said he was not aware of any specific demand on Spain, but Madrid was also expected to commit to speeding up structural reforms. Top European Union leaders were applying concerted pressure on Berlusconi to make an announcement by the end of the weekend so that the ECB could intervene in bond markets early next week, the sources said. "The ECB has already signalled their will to act. People in the market say the ECB has started inquiring about Italian bond prices, but it hasn't bought any," one source said. He said the ECB did not negotiate directly with governments, but the European Commission and European Council President Herman Van Rompuy were talking to the Italian and Spanish governments, and the French and German leaders were applying vital political pressure. An Italian government source said earlier that Berlusconi spoke by telephone on Friday to his Spanish counterpart Jose Luis Zapatero and Van Rompuy to discuss market turmoil. Four of the 23 ECB's Governing Council opposed the reviving of its bond-buying programme which has so far only bought Portuguese and Irish paper over the past two days. (Reporting by Paul Taylor, editing by Mike Peacock)

Bank of America has begun writing down principal on the mortgages of some troubled borrowers in California through a state program (Keep Your Home California) intended to help people facing foreclosure...

MBS, Treasuries, and Stocks are all making "triangle" patterns. In other words, trading ranges are consolidating with higher lows and lower highs seen in all markets. But that doesn't mean things will stay that way or that things haven't been exceedingly volatile in getting here. It's been really really choppy if you're watching MBS prices from minute to minute, but stepping back to a slightly longer term view, things actually look surprisingly tame, with an almost predictable and linear quality to the consolidating ranges. Fannie 4.0's are about 20 ticks down at the moment at 102-29 and 10yr notes are 7.3 bps higher at 2.48. Unless we move out of today's current range, changes of either sort of reprice are not high. Lenders sheets are weaker, fairly accurately reflecting today's lows.