MBS MORNING: Another Day Of Gains, This Time Less Volatile

Earlier this morning, the Factory Orders report surprised to the upside, with a print of +1.1% versus a +0.4% consensus and a +0.6% prior reading.  That bullish data stood in contrast to declining pending home sales.  Down 16% month over month from 114.1 last month to 96.0 today. AQ did work on that story...housing professionals should identify with his perspective. READ MORE

Bonds had opened better and traded well BEFORE the data, and current price levels are neither much better or worse than they were when the data hit. 

MBS 4.5's made it as high at 100-16 at 10AM, fell to 100-12 after the data, and have since rallied right back to 100-16.  With yesterday's close at 100-03, that's good for a 13 tick gain on the day.  The 10yr tsy is up about the same amount in price, dropping the yield just over 5 bps to 3.77.  Stocks had opened lower, rallied on the data, and have since fallen to near unchanged levels with the S&P at 1133 and the Dow down 34 pts to 10550.

With little data left on the day, floaters can stay floaty barring any alerts.  Remember that tomorrow brings FOMC minutes in the afternoon and that ADP employment in the AM is increasingly looked to for an early NFP indication.  So the significance of the econ data will begin to ramp up here as the week crosses the midpoint tomorrow, but "so far so good" as the volume continues to pick back up and we catch a lucky break with clearing of the Fog Of December 2009.  Hopefully the picture keeps improving as it comes into focus.