Just a quick note as the market is starting to take a little heat.  Culprits seem to be hedging for 21 billion of 10 year notes on today’s auction block (high noon cst) and stocks, which are riding a 6 day winning streak.  Currently, the Dow is plus 160 as the likes of Alcoa beat estimates and provided very good guidance going forward.  What we see here is some of the risk premium being taken out of the market as Europe has not imploded, stocks seemingly finding their footing as the market was looking for fading guidance (and not getting it), and the “double dip recession” being taken off the table.

Bonds, notes, and mortgage backs are or were at historic lows.  That said, my bias above provides traders with sticker shock as they look at pricing.  Therefore the fade and/or consolidation trade is in vogue.  As we speak, the 10 year note is off 16/32’s.  Mortgage backs are off nearly a quarter.  English translation is a high probability of a worsening Austin mortgage price change.  We see the tactical bias as being defensive with conditions and chart work pointing to a more bearish outcome.  Borrowers are advised to stay with this market and don’t let it put you to sleep.  It could be costly.