Month-End is just around the corner on Monday and depending on how tomorrow morning's economic data goes, it could set the tone for a correction that stands as a distinct possibility between stocks and bonds. Personal Incomes/Outlays and the Employment Cost Index hit at 830am followed by Consumer Sentiment at 955am.

See the following link for more details and consensus estimates:

Still in Knee-Jerk phase, but the auction was bad. A big miss on the the high yield vs "when-issued" and a big miss on the bid-to-cover. MBS prices are tumbling and 10yr yields are headed to test the 2.34/35 zone. Fannie 3.5's are currently at 100-17 and reprices for the worse are a distinct possibility unless things turn around quickly.

(Reuters) - A top Republican in the U.S. House of Representatives on Thursday proposed legislation to retool the U.S. mortgage market and pave the way for a larger private sector role in the housing finance system.

The legislation, sponsored by Representative Scott Garrett, a New Jersey Republican, aims to create clear underwriting standards and establish new market rules for the buying, selling, and securitization of mortgage loans as groundwork for an eventual winding down of Fannie Mae and Freddie Mac.

"We have not had a degree of certainty in this market place for some period of time prior to the collapse of 2008, but it is even more exacerbated by what happened after the collapse," said Garrett, who heads the House subcommittee that oversees Fannie Mae and Freddie Mac.

The bill would expand the mandate of the Federal Housing Finance Agency, which regulates the two firms, to make it responsible for the quality of underwriting for mortgage-backed securities and for increasing pricing transparency in the secondary mortgage market.

FHFA would set standards for the issuance of all housing debt, including private-label mortgage-backed securities and not just Fannie Mae and Freddie Mac's securities. The plan envisions FHFA would be able to establish different classes of mortgages in order to create a highly liquid market that appeals to private investors.

Garrett has led a House Republican effort to chip away at the role Fannie and Freddie play in the secondary mortgage market, which has already led to the introduction of 15 separate bills. "So long as the GSEs exist in their present configuration, the bailouts continue," Garrett said, referring to his goal to end taxpayer support to keep the two firms afloat.