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Monday - February 6, 2012 9:00am ET

Current trend Direction: Longer-term Sideways to Higher, Short-term - battling resistance

Float Lock Bias: Depending on time frame - Shorter-term bias towards locking, Longer-term floating

Current Price of FNMA 3.5% Bond: $103.66, -6bp

The US economic calendar slows down this week. There are no economic reports set for release today and the important readings don't come until Thursday's Initial Claims and Friday's Consumer Sentiment.

Mortgage Bonds are trading near unchanged as prices remain close to all-time price highs. The lower home loan rates have increased the supply of Mortgage Backed Securities coming to the market, but the Fed has been a buyer of the supply having purchased a total of $6.25B in Mortgage Bonds over the week ending February 1.

Greek debt talks have stalled today as the country draws critically close to default as leaders have not agreed upon a deal for bailout money. This uncertain news is pressuring Stocks lower so far today.

The Treasury will sell a total of $72B in government securities this week - $32B in 3-Year Notes on Tuesday, $24B in 10-Year Notes on Wednesday and $16B in 30-Year Bonds on Thursday. The added supply could weigh on Bond prices.

In the short-term we remain cautious with a bias towards locking. The Bond has been pushed backed away from resistance and could still easily follow the path of least resistance lower.

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