MBS RECAP: 5/6/2011

* U.S. MARCH CONSUMER CREDIT RISES $6.02 BLN (CONSENSUS RISE $5.0 BLN) VS REVISED $7.55 BLN INCEASE IN FEB * U.S. MARCH REVOLVING CREDIT RISES $1.95 BLN VS $2.60 BLN FALL IN FEB; MARCH NON-REVOLVING CREDIT RISES $4.07 BLN VS $10.15 BLN RISE IN FEB

It's a bit surreal, but 10's are at 3.146 at the moment, and FNCL 4.5's are up 3 ticks on the day at 103-18, both better than yesterday's best marks. Reprices for the better have already been seen, but a larger majority of lenders should get on board with recent movements. Despite the denial from the Greek Finance Minister, the rumors of a Greek dropout of the EU, in combination with the stock lever, technicals, and fundamental concerns over the pace of the recovery are fueling the bond-bullishness / stock-weakness.

*RTRS-11:54 - GREECE GOVERNMENT HAS RAISED POSSIBILITY OF LEAVING EURO ZONE AND REINTRODUCING OWN CURRENCY - GERMANY'S SPIEGEL ONLINE *RTRS-11:55 - SPIEGEL ONLINE SAYS FIN MINS FROM EUROZONE AND EU COMMISSION HOLDING CRISIS MEETING ON FRIDAY EVENING IN LUXEMBOURG *RTRS-11:56 - SPIEGEL ONLINE SAYS MEETING AGENDA INCLUDES POSSIBLE NEAR-TERM DEBT RESTRUCTURING FOR GREECE *RTRS-11:57 - SPIEGEL ONLINE SAYS GERMANY IS STRONGLY AGAINST ANY DISCUSSION ON GREECE LEAVING EURO ZONE *RTRS-12:09 - GERMANY GOVT SOURCE SAYS THERE ARE NO PLANS FOR GREECE TO LEAVE EURO ZONE *RTRS-12:38 - EURO ZONE SOURCE: SOME MINISTERS ARE MEETING IN LUXEMBOURG TO REVIEW ISSUES INCLUDING PORTUGAL, GREECE, ECB SUCCESSION BUT NOTHING MORE

Speculation that Greece is considering leaving the EU and reintroducing its own currency is being cited as a potential cause of a recent mini-sell-off in stocks and rally in TSYs. Said rally leaves 10yr notes at 3.182, best levels since NFP. But the better story is in MBS where FNCL 4.5's just ticked into the green, 1 tick up on the day at 103-15, making reprices for the better a strong possibility.

S&P's shot up to 1352.49 at the open and after dipping to 1346.75 are now back up to 1352.05. The relatively connected stock lever has pressured TSYs somewhat though they're fighting back. We're seeing the largest divergence in the correlation between the two markets right now as 10's struggle to get back to 3.20. Still no clear winner in that fight, but at least MBS appear to be marching to the beat of their own drummer as FNCL 4.5's remain content to consolidate highs and lows toward a 103-11 -- 103-12 price. Currently, they're 3 ticks up on the day at 103-12.