Slow Start to Trading Session. Rate Sheet Reprice Targets Offered

It's been a pretty slow morning in the rates market. Only 430,000 10yr futures contracts have traded. That is well below average. Color confirms a lack of activity in the secondary mortgage market as well.

Benchmark 10yr yields ticked higher in the overnight session but 3.82% held firm.  The 3.625% coupon bearing 10yr note is currently -0-01 at 98-16 yielding 3.809%.

The FN 4.5 is -0-02 at 100-05. The GN 4.5 is -0-01 at 101-00. The FN 4.5 is yielding 4.488%. Up 0.004% from yesterday's "going out" marks at 5pm. Yield spreads closed near their widest levels of the day yesterday after some late day originator supply was offered by originators. We've been basically tracking the directional movement of our benchmark big brothers today. Movement has been minimal but that descending triangle is storing technical energy and the FN 4.5 is heading toward an important decision. If price action continues to consolidate around 100-03, that stored energy will either be released higher back to the top of the range at 100-08 or in the opposite direction toward a test of  99-30.

Secondary managers if you let your commitments sit overnight. Lock those up this AM. Originators if you are working with one or two loans and looking to lock in the next 15 days, pricing is aggressive. Unless you might not get to the table in 15, lock. If you've got 30 days and a weak stomach, lock. If you've got 30 days and are not sure how the file will play out, you can afford to float, especially if you can't get pinned down at one investor. And for heaven's sake please don't lock and then go ask secondary if you can flip it. That isn't a nice thing to do at a best efforts shop. It kills your pull-thru ratio and hurts everyone else's loan pricing as a result.

REPRICES FOR THE BETTER AROUND 100-11

REPRICES FOR THE WORSE AROUND 99-28

Activity seems subdued. If I were looking for a reason to believe that chopatility might trigger the above offered reprice targets, I might say a lack of liquidity and mostly automated trader attention could be one culprit. One big sell ticket is all it takes for 10s to head toward a test of 3.85%. One big buy ticket isn't likely to have the same effect in the opposite direction though. With the media on a Goldman Sachs feeding frenzy and President Obama pitching financial reform, we are on high alert tapebomb watch too.

I covered Goldman's pristine 1Q earnings and restarted the regulatory reform discussion on THIS POST

By the way, the S&P passed a test of 1200 this morning. Support held. The S&P is +0.56% at 1204.27