MBS MID-DAY: Choppy Price Action

(WSJ) - Goldman Sachs Group Inc. has decided to sell its Litton Loan Servicing LP unit after the mortgage-servicing operation failed to deliver as much business as the securities firm hoped when it bought Litton in 2007. A spokesman for the New York company said Goldman "is exploring strategic options for Litton Loan Servicing, which include a possible sale." Litton is the 23rd-largest mortgage-loan servicer in the U.S., according to Inside Mortgage Finance, a trade publication. Home-loan servicers collect loan payments and work with troubled borrowers on behalf of investors that own securities backed by the loans. Goldman acquired Litton for $428 million plus $916 million in debt payments that Litton had outstanding at the time, according to securities filings. At the time of the takeover, Goldman saw Litton as a way to earn steady revenue from servicing mortgage-loan portfolios purchased by the Wall Street bank.

According to the US Census Bureau there were 167,564 empty houses in Nevada, which is about one out of every seven houses across that state. Although I imagine that many actually have some kind of occupant, something tells me that home building will not be flourishing there for a while. For perspective, putting three people in each one would cover the population of Kansas City, and four people would cover the population of Seattle. Nevada

After the morning data, bond yields moved lower, but 10's met resistance at 3.277. Stock futures that had been recovering then fell far enough to lead bonds through that resistance and after the stock market open, S&P's look to be putting in a supportive bounce at 1273. That coincided with a 3.257 bounce for 10yr yields which have since moved higher. That brings us to more current events as the 10yr tested the morning resistance, this time as support at 3.277. They found support on their first approach of the pivot, but are currently at 3.274 and may be heading back for another test. MBS have cut a tighter range by comparison, building on momentum within a positive trend channel off yesterday afternoon's lows. That trend channel is still intact, though prices in FNCL 4.5's are currently near the lower trendline at a price of 102-10. If this support fails, 102-07 is the next technical target and a potential early indicator of reprice risk building.

(Reuters) - Bahraini forces backed by helicopters launched a crackdown on protesters on Wednesday, imposing a curfew and clearing hundreds from a camp that had become the symbol of an uprising by the Shi'ite Muslim majority. Hospital sources said three policemen and at least two protesters were killed in the assault that began a day after Bahrain declared martial law to quell sectarian unrest that has sucked in troops from fellow Sunni-ruled neighbor Saudi Arabia. A defiant youth movement, which had been leading protests at the Pearl roundabout, called for a mass demonstration from all Manama suburbs to Budaya Street in the north of the capital. Minutes after the call was made, a military official appeared on Bahrain's state television to ban all marches and gatherings and impose a curfew from 4 p.m. to 4 a.m. 9 a.m to 9 p.m. EST) across a large swathe of Manama. A Reuters witness saw Bahraini tanks and armored vehicles move in the direction of Budaya Street. A member of parliament from the largest Shi'ite Muslim opposition group denounced the government assault as a declaration of war on the Shi'ite community. "This is war of annihilation. This does not happen even in wars and this is not acceptable," Abdel Jalil Khalil, the head of Wefaq's 18-member parliament bloc, said. "I saw them fire live rounds, in front of my own eyes."

After uninspiring morning economic data, stock futures moved lower and Treasury yields fell from 3.305 to 3.28 in 10yr notes. After consolidating there, 10's are falling again, now down to 3.263. MBS continue to lag treasuries into the rally, but 4.5's are at their best marks of the morning at 102-11. This should add up to stronger rate sheets this morning.

Producer Prices rose 1.6%, much higher than the consensus of +0.7% and the January reading of +0.8%. Excluding food and energy however, the rise was 0.2% which was exactly in line with expectations and lower than January's +0.5%. Year over year PPI stands at 5.6% versus a +4.8% consensus, but again, the core reading met expectations at +1.8%. Leading the gain in the headline numbers were Food at 3.9%, energy at 3.3%, Gasoline at 3.7%, and Heating oil at 14.6%. The rise in the headline number is the largest since June 2009 which came in at 1.9% and the year over year rise is the largest since March 2010 at 5.9%. Despite meeting expectations, the rise in Core PPI was the largest year over year figure since August 2009 at 2.3%. The rise in energy is the largest in just over a year and the rise in food is the largest since November 1974. The initial response in trading has been relatively tame with most of the increase attributable to non-core readings, something just yesterday referred to by the FOMC as "likely transitory."

February Housing Starts fell 22.5 pct versus an 18.4 pct gain in January to a unit rate of 479k. The consensus called for a 570k unit rate versus a 618k unit rate in January. Permits fell 8.2 pct to a record low of 517k versus a consensus of 570k and a 563k reading in January. Housing Completions, however, were up 13.9 pct to 581k versus 510k in January. The decline in starts is the largest since March 1984 and the unit rate is the lowest on record since April 2009 at 477k units.

UPDATE: THERE HAS BEEN MUCH VOLATILITY IN THE MARKETS AFTER THE FOLLOWING HEADLINES HIT NEWSWIRES...

DJ NEWSWIRE: EU ENERGY CHIEF: SITUATION AT JAPAN NUCLEAR PLANT OUT OF CONTROL. POSSIBLE CATASTROPHIC EVENTS IN NEXT HOURS

RTRS-EU ENERGY COMMISSIONER'S SPOKESWOMAN SAYS OETTINGER DOES NOT HAVE ANY SPECIFIC EXTRA INFORMATION ON THE SITUATION IN JAPAN