Despite the 4 tick improvement on the day that leaves MBS just about as close to all time highs as we could ask for, the lack of excitement this week is a bit of a let down. Sure, there was plenty of chopatility earlier in the week in MBS, but not only was it mostly confined to the range, prices actually ended exactly where they started on Monday! At least the boring and range-bound nature of the week made for plenty of predictability as the only real technical levels worthy of mention played important roles throughout the week. 101-21 became eerily supportive as the week progressed. and 101-27 mentioned as a pivot point on Monday and Tuesday maintained it's technical significance as resistance by week's end. In tsy's, the story was clearly about 3.31 and 3.38. (3.31 is an intraday standpoint whereas 3.32 would get the daily nod). And between those extremes you can see yields moving in almost perfectly symmetrical trend channels--more evidence of technical forces at work. But although the 1 week chart looks fairly well distributed between highs and lows, how strong is 3.31 vs. 3.38 in the long term? Yeah, the little teensie weensie red line (technical term) would be the 3.38 from the previous chart. To be fair, we could have extended to show that it actually has been quite significant over the past months as an internal trendline, but at the end of the day, 3.31 seems a much more daunting line to cross than 3.38. This is edified by the day over day futures chart which

With absolutely no exaggeration, all but one, maybe two of the times I've looked at my screens before writing this week MBS have been between -2 and +2 ticks on the day while changes in tsy's have been more pronounced. Same story today, at least on a price level, as 4.5's are up 2 ticks to 101-23 whereas 10's are down 6 ticks, bringing the yield up to 3.362. Neither of those levels are especially interesting as they both lie above levels that have supported 99% of the trade this week. For MBS, the level is obviously 101-21, which has received more than its fair share of mention this week, and likely needs no further introduction. And though we haven't seen much of it this week, the 3.38 lvl in tsys is equally significant. It just draws more of it's credibility from weeks past. I pointed out a "careful!" in the chart above as tsy's flirt with breaking a downtrend in yields. But the white circle on the volume forest also shows that volume picked up in response to the better buying opportunity, and on a Friday afternoon, that says a bit more than normal about the range. So at the risk of being too firm, I'm callin' it... 3.38 won't be broken with volume for the rest of the day. MBS won't break below 101-21 with volume either. That means lenders that haven't repriced yet, probably won't... 10 yr tsy futures aren't providing nearly the same level of clarity however... We'll get to a more robust discussion of this

The FN 4.0 is currently -0-02 at 99-08 and the FN 4.5 is trading +0-01 at 101-23. The range narrows...there isnt much room for further price appreciation in "rate sheet influential" MBS coupons. Mortgage rates will either go sideways or move higher. Lock.

Heading into the close, the FN 4.0 is trading +0-02 at 99-09 yielding 4.078% and the FN 4.5 is +0-02 at 101-24 yielding 4.286%. The secondary market current coupon (CC) is 4.13%. The CC is +78/10yr TSY and +67/10yr swap. As you can see in the chart below, after prices fell early in the week, "rate sheet influential" MBS prices haven't made much progress in either direction with most of the price action occurring between 101-26 and 101-20. This should continue into today's close. Again...lock!

Thursday's tend to be data-rich and today is no exception. After the "with us as always" jobless claims at 830, a concentrated dose of data and headlines hit at 10am. In the ongoing court case of Reality v. Stable Economic Recovery , Philly Fed survey served as chief counsel for the defense, topping expectations of 12.0 with a 16.7 reading. That was up from 11.5 reading in the prior month but did little to help already plummeting stocks. Philly Fed results did, however, give pause the the rally in bonds, but after a minor retracement, the LEI reading combined with the soothing words from Timayyy to bring bonds back to their strongest points of the past 2 days. Leading indicators printed down a tenth from from the .4, and the 0.3 actual was significantly lower than the previous 1.0. There was nothing organically beneficial in Geithner's testimony, but the lack of outright negatives took an unknown out of the equation. Additionally, Geithner's calls on banks to step up lending, coincided with legislation working it's way around the hill that altogether casts a bit of a shadow on supply. And of course, low supply of lending is usually favorable for rates, all things being equal. The net effect of on the bond-o-sphere has been a reasonably unchanged yield curve moving lower in yield. Other than laggard 10's and bullish 3's, the rest of the curve is 4.0-4.7 bps lower. Paradoxically, as 10's are underperforming the rest of the curve, previous weakness

It hasn't received as much air time these days, but the range trade and technical price levels are still very much in play. That has to do with the slightly less paradoxical directionality these days. Markets have tended to move in the direction suggested by data to a much greater extent than the summer months that saw the release of our hit single "Day Trader's Paradise..." Mortgages started off the day significantly weaker to tsy but rallied a lot harder into the noon hour. The highs of the day coincided with the upper limit of the trend channel we've been riding all week. After bouncing shortly thereafter at 101-27, weakness ensued through the close but never managing to bring prices below this AM's lows or yesterday's lows. In fact, we're only 2 ticks off Monday's lows... Meanwhile, you can see the highs grinding lower. MBS have been pretty stable in that regard as tsy's succumb to greater chopatility The white circles show the trend supporting lower yields, but presto chango with today's breakout and one man's ceiling is another man's floor. In other words, this is an INTERNAL TRENDLINE that may prove to be resistance for tsy's tomorrow. The one potential saving grace for this sort of reversal is the downward slope. There's no default technical suggestion that yields move higher from here, merely that the previous trend of lower yields is over (assuming the breakout stands confirmed by Friday). But in tsy futures

Rather than dismiss the trend of lower yields in tsy's as more likely to stop at 3.32, perhaps we should have focused our analysis on what yields might do on the upside! For now, however, both MBS and the 10yr movements are simple if not elegant examples of the technical levels we discussed this AM. You get resistance from the downtrend at the red circle and resistance at 101-27 at the white circle... Tsy's are worse off today... In fact, yields are approaching the unfriendly side of their trend... We watch, wait, and place bets on where the next bounce will be... I think we break upside support in 10yrs, but stay under 3.38+ support. Any takers? (just opinion, you're free to disagree) Any other bets? Oh yeah, and MBS'll probably have to follow suit to some extent meaning some lenders may reprice for the worse if things don't improve quickly. Especially if you're dealing with a lender that has a historical predisposition to pay attention to the yield curve in conjunction with MBS.

While the morning data served to bring out a bit of chopatility, 3.32% is still strong resistance and 3.37% is still strong support. Again...the data was an excuse to churn profits within the three day range. As would be expected, the price volatility exhibited by our directional guidance giver (benchmark rates) has spread into the mortgage market. It's been a choppy morning so far in terms of MBS prices. Unfortunately, the ups and downs are occurring in the RED for "rate sheet influential" MBS coupons. The FN 4.0 is currently -0-07 at 99-07 and the FN 4.5 is trading -0-05 at 101-20.