Mortgages were trading higher after Moody's chimed in about Spain needing to make $25 Billion EURO in budget cuts and with China revising its expectations for slower growth. With a few weak US data points, the possibility of QE3 could be taking off again, Friday's Non-Farm Payroll report could be it.

Today's rally in bonds had Fannie 3.5's right back to the top of the recent range (103-22ish) and a lot of market participants that we talked to were looking at that as a place to get short. I wasn't surprised to see mortgages start to come off of the highs into the close today.

Tomorrow traders will be focusing on the situation in Greece and the ADP private payroll reports. Stay tuned!