MBS MID-DAY: 2/24/2012

Both in terms of implied and realized volatility, things continue to be calm for bond markets this morning. 10yr yields have held inside a range that's just slightly wider than ONE basis point. (1.977 - 1.99) and are currently testing the lower end of that range at the moment.

When 10's are testing the day's lower range limits in terms of yield, MBS stand a decent chance to be testing the upper limits of their daily range. This is indeed the case with Fannie 3.5's currently at the top of their range, up 5 ticks on the day at 103-18. Here too, we see price action very well contained so far today. Both 10's and MBS trade inside yesterday's post-auction highs and lows.

If any of the upcoming Fed speakers say something that moves markets, it would be a surprise. More possible is a bit of movement after the Fed's Treasury purchases wrap up at 11am. From there, Greek PSI headlines remain a possibility, but unless that happens, markets thus far seem content to traipse aimlessly sideways at the week's best levels.

Speaking of "week's levels," if we end the day in current territory, it will be as if the week never occurred as we're currently in line with last Thursday's closing levels.

Sales of new single-family houses in January 2012 were at a seasonally adjusted annual rate of 321,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.9 percent (±16.6%)* below the revised December rate of 324,000, but is 3.5 percent (±17.6%)* above the January 2011 estimate of 310,000.

The median sales price of new houses sold in January 2012 was $217,100; the average sales price was $261,600. The seasonally adjusted estimate of new houses for sale at the end of January was 151,000. This represents a supply of 5.6 months at the current sales rate.

• RTRS- US CONSUMER SENTIMENT FINAL FEBRUARY 75.3 (CONSENSUS 73.0) VS PRELIMINARY FEBRUARY 72.5
• RTRS- CURRENT CONDITIONS INDEX FINAL FEBRUARY 83.0 (CONSENSUS 80.3) VS PRELIMINARY FEB 79.6
• RTRS- CONSUMER EXPECTATIONS INDEX FINAL FEBRUARY 70.3 (CONSENSUS 68.5) VS PRELIMINARY FEB 68.0
• RTRS- 12-MONTH ECONOMIC OUTLOOK INDEX FINAL FEBRUARY 82 VS PRELIMINARY FEB 82
• RTRS- 1-YEAR INFLATION OUTLOOK FINAL FEBRUARY 3.3 PCT VS PRELIMINARY FEB 3.2 PCT
• RTRS- 5-YEAR INFLATION OUTLOOK FINAL FEBRUARY 2.9 PCT VS PRELIMINARY FEB 2.9 PCT
• RTRS- CONSUMER SENTIMENT INDEX AND CONSUMER EXPECTATIONS INDEX BOTH AT HIGHEST SINCE FEB 2011

Fannie 3.5's traded in a range of 103-13 to 103-18 yesterday afternoon and are holding the same range so far this morning. Treasuries were contained in a fairly tight range overnight, drifting up to 2.01 in 10yr yields but returning to high 1.9's in the hour before the New York open on comments from German FinMin Schaeuble that Greece may need more help before 2020 as well as Fed's Bullard on CNBC (he'll also speak later today) speaking casually about QE3 in the event of economic deterioration.

Volume was decent, but only incidentally so, as Treasury futures are beginning the process of rolling March deliveries to June (similar to the roll for MBS, but every 3 months instead of every month).

The first item of significance on the economic calendar will be Consumer Sentiment at 9:55am followed closely by a somewhat less significant New Home Sales report at 10am. There's a smattering of Fed-Speak later in the day. Beyond that, there's headline risk out of Greece as the potential for news regarding private sector involvement (PSI) begins in earnest today. We're not sure if we'll see anything substantive or if there will be any news at all. The relevant story on the topic is included in "The Day Ahead," linked below.