For the first time in nearly two weeks, bond prices rose across the curve on Tuesday and climbed slightly higher this morning. The economic data came in very close to estimates yesterday and the five-year note auction fared a touch better-than-expected. The S&P / Case Shiller home price index fell in October after five straight monthly increases. While the decline was barely measurable, it serves as a reminder that the bounce back in real estate prices is not likely to occur as quickly as the three-year decline. The consensus among analysts seems to be for another 10% decline in home prices in 2010, making a new bottom.

The Conference Board’s consumer confidence measure rose a touch to 52.9 and has been confined to a narrow range since April. Confidence remains well above its lows but is still below previous recession’s lows and well below the “normal” levels. The five-year note auction was solid, finding better-than-expected demand, especially following the soft two-year note sale the previous day. Today, the Treasury will auction $32 billion seven-year notes at high noon.

The last bit of news for the week will be released tomorrow with weekly claims.  Trend signals in the last couple of weeks of the year can have trouble maintaining their direction in January.  Current bearish readings on Trend Intensity remain valid, but are getting tested by a very minimal corrective action.  Trend signals need prices to continue to hold below the 8-day moving average that currently sits at 116-045…..that measure is often critical resistance during a bearish trend.  However, a close above that level would neutralize any bearish readings.  The 10yr is currently sitting at 115-22 on futures, a yld of 3.807.  We priced mtg backs up this morning about 7-8 ticks and we are now only up a couple.  I don’t want to scare anyone, but price changes for the worse would be in play if we hold these current levels.  Please note that tomorrow is an early market close.

To everyone out there – Have a Happy New Year!!