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Good morning!

MBS prices are up +5/32 (FNMA 30-yr 4.0 at 100.08), which is about 8/32 higher than Friday at this time. The 30-yr fixed FNMA required net yield (60 day) is now at 4.46%, from 4.51% on Friday.

Treasury yields rose on Friday as stocks rose, brushing off the "news" of the bank stress tests. The information released by the Fed provided limited additional details of the methodology of the tests. While the individual banks were briefed on their results, those details will not be made public until at least May 4. Some banks are expected to require additional capital, either private or from the government. Most banks are expected to pass the stress tests. While the economic scenarios driving the tests seemed appropriately severe in February when first released, the deterioration in the economy since then has undermined them. Friday's focus also included the automakers with increasing expectations of bankruptcy by both GM and Chrysler. Since then, however, progress on Chrysler's union contracts has upped the odds that it will be able to restructure and sell to Fiat without going through bankruptcy. GM will scrap the Pontiac brand as part of its restructuring. Over the weekend and this morning, attention has focused on the swine flu spread which has rekindled SARS and pandemic concerns. While Mexico seems to be the center of attention, the assessment that the illness is spread human-to-human and the widespread reported cases, even though they are few in number, are raising governmental concerns and efforts. Markets are taking note with declines in world stocks being attributed to the scares. A flight-to-quality this morning is boosting Treasury bonds along with the dollar. Last week, the taxable muni market exploded with issuance of Build America bonds. Strong follow-through is expected this week. This week's economic calendar is fairly heavy and back-loaded.