MBS RECAP: Sideways Session

Stocks had opened the day quite a bit higher, but have been declining all day. With a fairly connected stock lever, these declines have helped bonds lose at a much gentler pace. The range of prices and yields is still ridiculously narrow. FNCL 4.5's are still within a tick of 102-12 and 10yr notes are at 3.273.

Lull us to sleep... It's like the markets are on post-traumatic-stress-let-down. Monday through Thursday was too much! So now it's just taking cues from the highs and lows earlier in the week and forming a perfect triangle into the weekend. It's about the most boring and apathetic thing imaginable... So FNCL 4.5's continue to trade in a range around 102-12 and 10yr notes around 3.28. 3,286 is about the centerline of the triangle, FYI. Perhaps we'll see some nervous traders pull their profits out before the weekend and that will shake things up a bit....

It's dead out there... MBS and Treasuries have cut narrow paths in light volume. FNCL 4.5's remain around previous levels, currently at 102-12. 10yr notes are at 3.2769. Even the raft of Bank Stress Test results is doing little, if anything to move either stocks or bonds. S&P's have been between 1281 and 1284 since 11:30. The stability however, has been good enough for a few lenders to reprice for the better.

Calling the document "unprecedented in its scope and prescriptiveness," the Securities Industry and Financial Markets Association (SIFMA) has criticized the so-called settlement agreement with mortgage servicers issued by the 50 state attorneys general in early March. It also rather pointedly requested a seat at the negotiation table. Randy Snook, executive vice president, business policies and practices at SIFMA said that, while the group recognized that the term sheet was only a draft, "it requires a careful legal and market impact analysis, particularly for unintended consequences." Snook said that any reform of mortgage servicing standards must reflect the interests of the consumer, the housing market, and the broader economy as we continue to address foreclosure issues. According to SIFMA, the proposed terms would put at risk investors in mortgage-backed securities (MBS) who stand to absorb the losses from significantly extended foreclosure timelines due to the implementation challenges of the prescriptive terms of the settlement." The end result, SIFMA says, would be to further hurt investor confidence in private-label securitization markets "that are so vital to the nascent economic recovery." Extending those foreclosure timelines would also adversely impact communities with large inventories of vacant buildings. In addition, the terms are so broad they could increase the price of mortgages to consumers. FULL STORY...

(Reuters) - The Federal Reserve will allow some of the largest U.S. banks to boost or restart dividends payments this year but will restrict the amounts to 30 percent or less of the company's anticipated earnings, the central bank said on Friday. The Fed will now start notifying the 19 largest banks, including Citigroup, Bank of America and Goldman Sachs, whether they passed the second round of stress tests and whether they have won approval to pay out dividends. Improvements in economic conditions and capital positions of the largest financial institutions has assuaged central bank concerns. From the end of 2008 through 2010, common equity increased by more than $300 billion at the big banks, the Fed said. The Fed did not release results of the stress tests. (Reporting by Rachelle Younglai; Editing by Andrea Ricci)

(Reuters) - Yemeni security forces and unidentified snipers opened fire at a protest in Sanaa after Muslim prayers Friday, killing at least 30 people and wounding 200 others, medical sources and witnesses told Reuters. Security forces at first fired into the air to prevent anti-government protesters from marching after prayers from their headquarters at Sanaa University. After the initial gunfire, the shooting continued and the toll mounted. It was not immediately clear who was responsible for the deaths, with witnesses saying firing appeared to come from different directions. Tens of thousands of Yemenis had gathered in Sanaa for competing prayers and protests as businessmen floated a proposal to end a standoff between President Ali Abdullah Saleh and protesters demanding he step down immediately. "The situation is tragic. There are dozens killed and hundreds wounded. We couldn't send relief," said Abdul-Qawi al-Shumeiri, secretary-general of the doctor's syndicate. Protesters accused plainclothes snipers of firing from rooftops, and said they had detained several of the gunmen.

(Reuters) - Muammar Gaddafi's government said it was declaring a unilateral ceasefire in its offensive to crush Libya's revolt, as Western warplanes prepared to attack his forces. But government troops pounded the rebel-held western city of Misrata on Friday, killing at least 25 people including children, a doctor there told Reuters. Residents said there was no sign of a ceasefire. And in the rebel-controlled east, the government declaration was dismissed as a ruse or a sign Gaddafi was desperate. "We have to be very cautious. He is now starting to be afraid, but on the ground the threat has not changed," a French spokesman said. Britain, like France a strong advocate of armed action, said it would judge Gaddafi by "actions, not his words." Turkey, an opponent of military action, said the ceasefire should go into effect immediately. "We decided on an immediate ceasefire and on an immediate stop to all military operations," Libyan Foreign Minister Moussa Koussa told reporters in Tripoli on Friday, after the U.N. Security Council passed a resolution authorizing military action.

After FNCL 4.5's rallied about 4 ticks off their 102-08 low at 9:30am, the new levels have maintained a fairly tight range around 102-12. This will be a slight benefit for lenders that haven't come out with pricing yet, and while it has resulted in the odd reprice for the better, it may not be enough movement for many more lenders to get involved with that. 102-08 would be a good target to set for an automatic alert, and 102-18 on the upside.