Bond markets are on the verge of disavowing their allegiance to higher prices and lower yields that has, thus far, characterized most of the new year.  This resolution picked up steam into the beginning of February when the news was awash with "emerging market panic."  Once that wave was done being ridden, the rally quickly lost its sparkle, and even last week's rotten NFP wasn't enough to unequivocally keep the dream alive.  Here's a quick idea of how yields have moved in the end of 2013 and beginning of 2014.

With that chart in mind, one might conclude it's up to Yellen (or rather, markets' reaction to Yellen) to give rates a final push out of the trend or to preserve it further.  We'll get a good idea about that starting at 10am today when Yellen testifies before the House Financial Services Committee.  Even then, we discussed some divergence between MBS and Treasuries yesterday.  Is it enough to make for less concern about mortgage rates vs Treasury yields? 

In a word: no.  While it's true MBS have outperformed Treasuries fairly steadily in February, a lot of that has had to do with the nature of the market movements.  Specifically, Treasuries were rallying on the weird flight-to-safety bid created by the emerging market kool-aid and the stock sell-off (and of course the elephant in the room that no one mentioned: the epic positional reload following the crowded trade for higher yields in the new year).  MBS tend to lag such flight-to-safety moves and this time was no exception.  In recent days, we're simply seeing an unwinding of that process as well as the typical benefit to MBS (relative to Treasuries) following NFP, and finally the lack of new MBS supply (more buyers than sellers--no joke). 

Tonight's "roll" (Class A MBS Settlement where Fannie and Freddie 30yr fixed coupons for February will no longer be actively traded and where March prices take over as the new "front month" indication, making for an apparent drop in price of 8-12 ticks) will essentially bring MBS back in line with their relative performance vs Treasuries from before the whole flight-to-safety thing.

Yellen begins at 10am (text of prepared remarks released at 8:30am).  The day's only major economic data--Wholesale Inventories/Sales, reports at the same time.  It's not typically a market mover.