MBS MID-DAY: Backin-Up Before Bernanke

(Census Bureau)- National vacancy rates in the first quarter 2011 were 9.7 percent for rental housing and 2.6 percent for homeowner housing, the Department of Commerce’s Census Bureau announced today. The rental vacancy rate of 9.7 percent was 0.9 percentage points lower than the rate recorded in the first quarter 2010 (+/-0.5 percentage points) and 0.3 percentage points higher than last quarter (+/-0.4)*. The homeowner vacancy rate of 2.6 percent was approximately the same as the first quarter 2010 rate (+/-0.2) and 0.1 percentage point lower (+/-0.2)* than the rate last quarter (2.7 percent). The homeownership rate of 66.4 percent was 0.7 percentage points (+/-0.4%) lower than the first quarter 2010 rate (67.1 percent) and 0.1 percentage point (+/-0.4%)* lower than the rate last quarter (66.5 percent). FULL RELEASE: http://www.census.gov/hhes/www/housing/hvs/qtr111/files/q111press.pdf

After rallying to the highest close since mid 2008, S&P's are holding in the green so far this morning at 1348.93. Until the 930am stock market open, 10yr notes had held on to 3.353 fairly well but have recently risen to 3.357. MBS are also at their weakest levels of the day with FNCL 4.5's down 7 ticks to 102-10. Volume is low ahead of the 1130am auction of 5yr Treasury notes and the 1230pm Fed Announcement.

(WSJ) - When Federal Reserve Chairman Ben Bernanke makes his debut press conference Wednesday, his every word will be parsed for signs of where he hopes to take U.S. monetary policy. Specifically, many people want to know when the central bank will begin raising interest rates, and when it will begin off-loading some assets, including Treasurys and its multitrillion-dollar cache of mortgages. As Mr. Bernanke touches on topics familiar to Fed-watchers, he will use seemingly ordinary words or phrases that are freighted with important economic messages in the world of the Fed. A few examples: READ EM AT THE WSJ: http://online.wsj.com/article/SB10001424052748704729304576287402925861890.html

If you're betting on a particular security moving in one direction and it moves far enough in the other direction, you're forced to "cover." In so doing, you move the price even more, forcing others with similar bets to do the same--snowball effect. This is what occurred yesterday in benchmark Treasuries, which is why we weren't too excited about the gains coming in to today, and in part, also explains why MBS didn't participate as much in the rally. And so it is that we're greeted this morning by 10yr yields in the thick of yesterday morning's range, currently at 3.353. FNCL 4.5 MBS are down 6 ticks at 102-11. The Durable Goods data that was just released had little impact on bond markets and as expected, we're waiting for FOMC at 1230pm. There's also the 5yr auction at 1130am, but the Fed Announcement and subsequent press-conference can easily trump "mere" auction results. Just taking things one tick at a time until then...

* US MARCH DURABLES ORDERS +2.5 PCT (CONS. +2.0 PCT) VS FEB +0.7 PCT (PREV -0.6 PCT) * U.S. MARCH DURABLES EX-TRANSPORTATION +1.3 PCT (CONS +1.8 PCT) VS FEB +0.6 PCT (PREV -0.3 PCT) * U.S. MARCH DURABLES EX-DEFENSE +2.3 PCT (CONS +1.7 PCT) VS FEB +2.0 PCT (PREV +0.7 PCT)