MBS MID-DAY: Recovering as Stocks Unwind Gains

The stock lever has been fairly connected since stocks opened just over an hour ago. As the S&P just crossed into negative territory on the day, 10yr yields just ticked into their best levels of the morning at 3.51. FNCL 4.5's are currently at their highs as well, 101-27, which is in line with Friday's closing levels.

FNCL 4.5's are currently at 101-23 and haven't made it any higher than that, or lower than 101-22 in the past hour. Treasuries are a bit weaker by comparison with the 10yr trying to dig it's heals in at its weakest levels of the day with yields looking for support around 3.55. In the midst of these higher yields, higher stock futures, and higher oil, MBS holding a steady, narrow range is a victory by comparison.

*** FED'S FISHER SAYS REMAINS DOUBTFUL ABOUT FED'S CURRENT $600 BILLION BOND BUYING PROGRAM *** WILL VOTE TO CURTAIL OR DISCONTINUE QE2 BOND BUYING PROGRAM IF PROVES TO BE COUNTERPRODUCTIVE *** REITERATES WILL NOT BACK FURTHER FED SUPPORT FOR ECONOMY BEYOND QE2

10yr note yields rose slightly to officially test the yield lows seen immediately following Friday's Employment Situation Report--3.546/3.548. For treasuries, these are in line with the weakest levels of the morning, yet FNCL 4.5's remain at 101-22 and have thus far been operating in a range from 101-21 to 101-24.

*** FED'S LOCKHART: CAUTIOUS ABOUT EXTENDING BOND PURCHASES AFTER JUNE, BUT NEW RISKS CALL FOR FLEXIBILITY *** LOCKHART SAYS WILL TAKE A LONG TIME FOR ECONOMY TO RETURN TO FULL EMPLOYMENT *** LOCKHART: UNREST IN THE MIDDLE EAST AND NORTH AFRICA SHIFTS MY SENSE OF BALANCE OF RISKS *** LOCKHART: LATEST JOBS DATA ENCOURAGING BUT PREMATURE TO DECLARE A JOBS RECOVERY FIRMLY ESTABLISHED *** LOCKHART: FIRMING OF CORE INFLATION NOT UNDESIRED, PUTS INFLATION AROUND 2 PCT ZONE CONSISTENT WITH MANDATE *** LOCKHART: "INFLATION ANXIETY" AMONG BUSINESS, CONSUMERS YET TO "LOOSEN MOORINGS" OF INFLATION EXPECTATIONS *** LOCKHART: WIDESPREAD UPWARD WAGE PRESSURE KEY TO BROADER INFLATION, DON'T SEE THEM DEVELOPING SOON *** LOCKHART: DO NOT EXPECT RECENT FIRMING INFLATION TO HERALD MORE ACCELERATION DESPITE "CONSIDERABLE PUBLIC CONCERN" *** LOCKHART: BROAD INFLATION WORRIES, EVEN IN REACTION TO TEMPORARY PRICE MOVES, COULD BOOST INFLATION EXPECTATIONS *** LOCKHART SAYS FED MUST REMAIN VIGILANT TO ENSURE INFLATION EXPECTATIONS REMAIN CONTAINED *** LOCKHART: SOME BUSINESS CONTACTS SAY CAN PASS PRICE RISES TO CONSUMERS AND PLAN TO DO SO OVER NEXT YEAR *** LOCKHART: STILL CONCERN THAT DEMAND IS FRAGILE AND PRICING POWER TOO LIMITED IN MOST MARKETS TO ALLOW FOR BIG PRICE HIKES *** LOCKHART: HOUSING REMAINS SOFT PART OF OTHERWISE ENCOURAGING ECONOMIC PICTURE, PRICES MAY STILL BE FINDING BOTTOM *** LOCKHART: WOULD BE NICE, BUT HIGHLY UNLIKELY, TO HAVE CIRCUMSTANCE WHERE FED'S BALANCE SHEET COULD BE UNWOUND PASSIVELY

A portion Friday's gains are gone this morning as the 10yr note currently sits at 3.542 and FNCL 4.5's are at 101-22. Treasuries are currently on a pivot point achieved Friday morning in high volume which initially provided resistance to further gains before being broken later in the morning. Holding it this morning as support would be a bullish sign on this mostly data-free day. The only real data of the day comes at 3pm in the form of January's Consumer Credit. previously at 6.10 bln, expected now at 3.90 bln.