Weekly Jobless Claims broke out of the gate first this morning, unchanged at 505K while the Continuing Claims Index fell for the 9th consecutive week to 5.61 million.  Seasonal factors are at work here as the holiday season tends to skew the numbers.  One thing is for certain, 505K in weekly claims does not set the world on fire.  Until we start to see a pickup in average hours worked, slack in the labor market will remain.

Today’s 9:00 cst data points were Leading Economic Indicators and the Philly Fed Index.  LEI posted a plus .3% gain, .2% below expectations.  Among the 10 composite indices, 6 posted positive gains.  Consumer expectations and Building Permits provided the drag on the overall index.  Manufacturing in the land of cheese steaks and Dirty Bird football improved a few points to 16.7.  A rise in new orders has helped the region to post gains in each of the last four months.

Treasury Secretary Geithner is on the hill today, touting regulatory accountability and the need to eliminate the perception of “too big to fail.” Our view that risk is back in vogue, noting gold at record highs and stocks up 60%.  Systemic risk/asset bubble risk is creeping back into the market as investors are forced into stocks and fixed income spread product.  The Fed is on hold for at least another year and they (Fed) will need to see GDP growth of 4% to 5% before they will tap on the brakes (raise interest rates).  We’d look for Austin mortgage rates to stay low well into 2010.  Technically, we matched the old highs (low yield) of late September.

The test of this high now become pivotal for the next directional move.  We need to close at a yield of 3.30% or lower on the 10 year note to boost the bullish, breakout pattern.  If this comes to fruition, the next target will we’ll be looking for is 3.23%.  On the flip side, a failure to goose the market higher will result in a continued range trade and a retest of yields in the 3.41%/3.42% arena.  Currently the 10 year note is up 7/32’s to yield 3.34%.  Mortgage backed securities have underperformed all week, only up 1/32nd as spreads continue to widen.  Tough call here as the market continues to assault the low yield level but fails to take it out. However, positive structure points to levels holding near the highs as the bears have been kept at bay.  The best way to view your options is by risk/reward.

Be careful of there.