Life is not fair at times.  A few hours ago, the second stock rally of the day gave way to increasing treasury yields and pressured MBS into its lowest levels of the day.  But even as the stock rally completely reversed course into the close, MBS failed to come along for the ride, ending in the middle of their range.  A graphs tell the story quite well:

Some are chalking up the late tanking in stocks to the  Obama's administration's announcement that it may raise taxes on US Firms offshore earnings.  That story comes near the end of day that, as expected, saw extremely limited data from which to  guage MBS trading direction.  With nothing but MBA applications on the calendar for scheduled data, which we covered in the first post this AM, markets were relegated to taking cues from earnings news, treasuries, and stock movements all day.

Treasuries were under selling pressure almost from the outset on fresh supply concerns.  This can be seen on the yellow line above as the 10 year pushed back up near it's range-bound highs around  the 3.0% mark.  As has been the perennial case this year, such treasury sell-off's have given way to reasonable spread tightening for MBS, and today was no exception.  "Up in coupon" one out slightly today from a price perspective with levels around 6% holding even on the day versus some scattered negetivity in the lower regions of the MBS coupon stack.  Here are closing marks:

FN30__________________________________

FN 4.0 -------->>>> -0-01   to  99-28   from 99-29

FN 4.5 -------->>>> -0-02   to 101-23  from 101-25

FN 5.0 -------->>>> -0-01   to 102-27  from 102-29

FN 5.5 -------->>>> -0-01   to 103-20  from 103-21

FN 6.0 -------->>>> -0-00   to 104-15  from 104-15

GN30_________________________________ 

GN 4.0 -------->>>> -0-02   to 100-01   from 100-04

GN 4.5 -------->>>> -0-04   to 99-31   from 102-03

GN 5.0 -------->>>> -0-01  to 103-14   from 103-15

GN 5.5 -------->>>> -0-01   to 103-28   from 103-29

Of the data that moved stocks today, Apple earnings (slightly better than expected) seemed to take center stage sparking the first major rally of the day.  From lows of around 7900, stocks got as high as  8045 before finally falling to 7868.  As can be seen in the chart, treasuries traced stocks fairly reliably on the day, as limited data day for us is the same for them, yet they are more reactive to stocks.  The comparitively larger amount of selling in treasuries benefited spreads greatly earlier in the day, and to a slightly lesser extent by day's end.  This relative spread tightness is a viable reason that we did not see more bid side interest as stocks fell.

It was another healthy day of supply with originators in for over $3 bln and although the Fed bought to offset that, the tight spread situation prevented enough buying to see us end in the green.  The only other industry related release of the day was the FHFA release of home prices which showed a rise of .7% in February following a revised 1% gain in January's previously reported 1.7% gain.  Prices are still down 6.5% from a year ago with the west coast leading the way with the worst losses.

Tomorrow brings a much welcomed day of more shceduled data as we get jobless claims early at 830AM and existing home sales at 10AM.  The consensus for initial claims is a slight increase from 610k to 633k.  Home sales are expected to decline 6.4% to 4690k.  Adding to today's treasury supply concerns is tomorrow's announcement of auctions including 2's, 5's, and 7's, estimated at just over $100 bln.  Thursday's, of course, are also the day we get the Fed's weekly report on MBS purchase activity which showed a notable post-holiday decrease from around $30 bln to around $20 bln last week.  Judging by price movements it would appear that this week has also been somewhat off those $30 bln + higher levels.  Finally, The Mortgage Reform and Anti Predatory Lending Act of 2009 will be heard before a House Financial Services Committee tomorrow.  The bill would affect YSP and penalties for predatory lending practices and even proposes putting 5% ownership of certain types of non-garden variety loans back on originators.  As it is only in front of the house now, the bill is certainly not in its final form now, and we'll bring you more coverage on it when and if it gets closer to reality.

For this afternoon and tomorrow, from a lock/float perspective, we find ourselves in the same boat we've been in several times in the past few weeks: just above long term floor levels.  We're not high enough above these "floor" levels to necessitate firm desire to lock with gains and until we actually break through said floor, it doesn't make much sense to lock as this floor has only been broken 3 times in 5 months and has signaled a momentum shift from several months in one range to several months in another.  However, there also does not appear to be much impetus for rallies as traders are waiting for new prepayments data in a few weeks which will also coincide with April's coupon settlement.  Until then, both upside and downside may be limited making locking or floating a consideration better informed by lender's specific behavior as opposed to one's anticipation of MBS movements.  Having that in mind puts more importance on avoiding drastic intraday downward movements.  We'll, of course, keep you aprised of those potentialities in real time as the days tick down to more market-moving data releases.

Coming up next, we have our weekly commentary from Bill Berliner which promises, as always, to be excellent reading.  You're encouraged to chime in with your thoughts and reactions in the comments section for further discussion.