Bond prices rose on Friday as stocks sank in trading that was driven more by stock market technicals and concerns than by any other factor. Stocks had their worst week since early July. The University of Michigan’s final October consumer confidence index was a touch higher than expected than September’s level, but remains at recessionary levels. The Chicago purchasing managers’ index rose sharply to its highest level since December 2007 and beat expectations. The report is closely watched for clues to the national ISM index which was released today at a print of 55.7.  This number was 3.1 points higher than the previous month’s reading and was higher than economists expected.

Stocks have taken wings off that number combined with Construction Spending released up .8%.   Pending Home Sales were also on the board this morning posting a jump of 6.1%, reaching its highest level since December of 2006.  All of these numbers combined have sent mortgage pricing to slightly lower levels than where most investors priced this morning.  Stocks have some legs again trading up 98 points or so on the DOW.  Also to note, over the weekend, CIT filed bankruptcy following its failure to receive bondholder approval for an exchange offer. Many analysts have described the filing as being a positive for bond holders who could now recover more than was being offered.

This week will feature Wednesday’s FOMC meeting sandwiched between numerous important economic reports (most notably being today’s ISM release and Friday’s October employment data). The FOMC meeting comes to the forefront with growing division inside and outside the Fed over the proper timeline for tightening and other programs.  For now, the pullback this morning has taken us back into the high volume levels that formed on Friday, ranging from a 118-035 to 118-16.  Currently, the 10yr note is hovering around the 118-195 level, trading at 3.405, along with mortgage backs down a couple of ticks.