We expect a good close (below 2.81%) and see the market as neutral/bullish near term, trading at current levels or a little better near the center of the range

Happy Tax Day!  CPI, inflation at the consumer level, fell .1% while the core index was up .2%.  Forecasters were looking for a plus .1% print on the headline number and a plus .1% number within the core sector.  Falling food, energy, and transportation costs more than offset the a rise in goods and services, presenting an overall benign inflation report.  At least, for now. 

The Empire State (New York) Manufacturing Index improved this morning from -8.23 to -14.65.  The index shows improvement yet is still contracting in that region of the country.  Another measure we watch is what’s called the TIC report.  This report measures net foreign capital investment in long dated securities ( 10 year note through 30 year bonds).  The measure rose 5 billion and even China increased their holdings of our debt by 4.6 billion.  Maybe Treasury Secretary Geithner has been  sucking up to them. 

The NAHB housing index was also released, up 5 points to 14.  This is the highest level since October 2008 and shows signs of encouragement for a bottom in housing.  Last but not least, the Fed’s Beige Book was just released.  Although economic conditions  continue to deteriorate, 5 Fed districts reported a moderation in the pace of decline.  Complete text attached.  Overall, trading volume is light with the 10 year note currently up 4/32’s (yield 2.77%), mortgage backs up 2/32’s, and stocks up 17 points on the big board.  Technically, we like the fact that 10 year notes (on the chart) took out the 2.81% level (now trading at 2.77%). 

Bulls need to hold below that level (2.81%) to retain control.  The cash close (4:00 pm cst) will be important and outside of an surprise selling into the late afternoon, will be a nice win for the bulls.  We expect a good close (below 2.81%) and see the market as neutral/bullish near term, trading at current levels or a little better near the center of the range.

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