MBS RECAP: Off the Price Highs

Naturally, tomorrow will begin with Dennis Lockhart at 8:25am (note the sarcasm... We're merely entertained at 4/5 days this week with Lockhart comments). But lo and behold: there are other economic events as well (though not very many this week!). Tuesday is one of the more action packed days as we get a mid-tier piece of data with ISM Non-Manufacturing Index at 10:00am. Then, following Fed-Speak from Kocherlakota and Plosser, it's a top-tier release in the form of FOMC Minutes. At 2pm that's the last relevant calendar item for the day. For a detailed look at the rest of the week's economic happenings, the following link is the place to be.

*** FED'S EVANS-ECONOMY CONTINUES TO IMPROVE, PRETTY MUCH ACCORDING TO PLAN *** "QUITE LIKELY" THAT $600 BLN QE2 "ABOUT THE RIGHT NUMBER" T*** NEED A FEW MORE QUARTERS OF GROWTH, WOULDN'T BE SURPRISED IF TIGHTENING IN 2012 -CNBC *** FOOD AND ENERGY PRICES UP, HURTS POCKETBOOK, BUT NOT INFLATION *** WOULD BE DIFFICULT FOR INFLATION TO PICK UP QUITE STRONGLY WITHOUT WAGE GROWTH

(CBS News) - If there was a question about whether we're headed for a second housing shock, that was settled last week with news that home prices have fallen a sixth consecutive month. Values are nearly back to levels of the Great Recession. One thing weighing on the economy is the huge number of foreclosed houses. Many are stuck on the market for a reason you wouldn't expect: banks can't find the ownership documents. Who really owns your mortgage? On 60 Minutes, Scott Pelley explains a bizarre aftershock of the U.S. financial collapse: An epidemic of forged and missing mortgage documents.

*** U.S. TREASURY DEPARTMENT PROJECTS THAT DEBT LIMIT WILL BE REACHED NO LATER THAN MAY 16, 2011 *** TREASURY SAYS PROJECTION BASED ON EXPECTED LEVEL OF TAX RECEIPTS, TIMING OF COMMITMENTS *** TREASURY DOES NOT BELIEVE PROJECTIONS LIKELY TO CHANGE IN A WAY THAT WOULD GIVE CONGRESS MORE TIME TO ACT *** TREASURY SAYS WILL PROVIDE AN UPDATE OF DEBT LIMIT PROJECTION EARLY MAY *** IF DEBT LIMIT NOT INCREASED, TREASURY SAYS HAS AUTHORITY TO TAKE CERTAIN EXTRAORDINARY MEASURES TO POSTPONE DATE U.S. WOULD DEFAULT ON OBLIGATIONS *** TREASURY SAYS ACTIONS WOULD BE EXHAUSTED AFTER ABOUT 8 WEEKS *** TREASURY SAYS THE U.S WOULD HAVE "NO HEADROOM" TO BORROW WITHIN THE LIMIT AVAILABLE AFTER ABOUT JULY 8, 2011

FNCL 4.5's are now only up 3 ticks on the day at 101-25. This is just far enough from the 102-00 highs to suggest a few scattered reprices for the worse are not entirely out of the question. 10yr notes have backed up about 2bps during MBS's 7 tick loss, bringing yields up to 3.42.

*** IMF CHIEF SAYS GLOBAL ECONOMIC RECOVERY FRAGILE, UNEVEN, 'GREAT UNCERTAINTY' PREVAILS *** IMF CHIEF - EUROPE NEEDS A 'COMPREHENSIVE SOLUTION' TO DEAL WITH FINANCIAL, SOVEREIGN DEBT PROBLEMS *** IMF CHIEF-PROGRESS TO FIX PROBLEMS IN EUROPE HAS BEEN PARTIAL, PIECEMEAL SO FAR, POSES RISKS *** IMF CHIEF:FAR-REACHING POLITICAL, SOCIAL AND ECONOMIC CHANGES NEEDED AS PART OF MIDEAST TRANSFORMATION *** IMF CHIEF CAUTIONS THAT CHANGE IN MIDEAST IS ON SCALE THAT TAKES TIME AND EFFORT *** IMF CHIEF-IMMEDIATE CHALLENGE IN MIDEAST IS TO PRESERVE SOCIAL COHESION WITHOUT UNDERMINING STABILITY *** IMF CHIEF WARNS-MIDEAST INSTABILITY COULD DERAIL EFFORT TO CREATE JOBS, GROW LABOR FORCE *** IMF CHIEF SAYS MONETARY POLICY MUST GO BEYOND PRICE STABILITY, ALSO LOOK AT FINANCIAL STABILITY *** IMF CHIEF SAYS FINANCIAL SECTOR REGULATION MUST NOW EXTEND TO 'SHADOW BANKING

As far as boring days go, this is one of our favorite kinds... Stocks are back to unchanged after opening moderately stronger. As they've declined, bond yields have kept pace relatively well with 10yr yields currently at 3.41 and FNCL 4.5's up 8 ticks on the day at 101-30. It's probably, and additionally, it looks like some resistance is kicking in now to further gains.

You're either looking at rate sheets that are improved over Friday's last offerings or potentially a reprice for the better if you're lender priced quite early this morning. FNCL 4.5's are 8 ticks up on the day at 101-30 and 10yr yields are just shy of 4bps better on the day at 3.4105. Treasuries have tracked with stocks with fairly high correlation almost all day. There's little else for them to do considering the "slowness" of the day and lack of scheduled data/events.