Bonds, notes and mortgage backs have rallied this morning as stocks take a breather from their 25% bear market pop.  Volume on all fronts, equities and fixed income are light as most of the world’s markets are closed for “Easter Monday.”  Hope you and yours had a nice weekend as well. 

As we mentioned, stocks have been off as much as 100 points today, currently down 80 on the big board.  Profit taking, earnings season in effect, and reports of a surgical bankruptcy ahead for GM are all weighing on that market.  Fed buying, the lack of treasury auctions this week, and the general notion that the Fed will continue to be aggressive any time the 10 year note closes in on 3.0% seems to be in our favor today. 

Currently the note is up 18/32’s to yield 2.86%, mortgage backs are up 5/32’s, and stocks as we mentioned are off 80 something on the big board.  The week ahead will hit the ground running tomorrow with the release of PPI (inflation at the wholesale level), Retail Sales (very important to watch), Housing Index, and Business Inventories.  Wednesday’s plate will be full of CPI (inflation at the consumer level), New York Manufacturing Survey, Industrial Production/Capacity Utilization, and the Fed’s Beige Book, a snap shot of the economy provided for each Fed district. 

Thursday’s data will include Weekly Claims, New Residential Construction, and the Philly Fed Index.  Friday will end the week with the Michigan Sentiment Survey.  Technically, the 100 day moving average has provided good support for the 10 year note.  Now that we are re-entering the middle of the range, a test of 2.83% (cash yield on the 10 year) is likely.  Taking out that level (trading below 2.83%0 would be quite bullish but looks unlikely due to mixed trend signals.   Also, the data due for release can hurt or help us as well.