Thursday's tend to be data-rich and today is no exception.  After the "with us as always" jobless claims at 830, a concentrated dose of data and headlines hit at 10am.  In the ongoing court case of Reality v. Stable Economic Recovery, Philly Fed survey served as chief counsel for the defense, topping expectations of 12.0 with a 16.7 reading.  That was up from 11.5 reading in the prior month but did little to help already plummeting stocks.

Philly Fed results did, however, give pause the the rally in bonds, but after a minor retracement, the LEI reading combined with the soothing words from Timayyy to bring bonds back to their strongest points of the past 2 days.  Leading indicators printed down  a tenth from from the .4, and the 0.3 actual was significantly lower than the previous 1.0.  There was nothing organically beneficial in Geithner's testimony, but the lack of outright negatives took an unknown out of the equation.  Additionally, Geithner's calls on banks to step up lending, coincided with legislation working it's way around the hill that altogether casts a bit of a shadow on supply.  And of course, low supply of lending is usually favorable for rates, all things being equal.

The net effect of on the bond-o-sphere has been a reasonably unchanged yield curve moving lower in yield.  Other than laggard 10's and bullish 3's, the rest of the curve is 4.0-4.7 bps lower.  Paradoxically, as 10's are underperforming the rest of the curve, previous weakness in MBS has sparked enough buying to maintain a "down in coupon" bias with 4.0's up the most (3 ticks to 99-10) and 5.5's down a tick to 105-22.  Our standard issue 4.5's are up two ticks at 101-24. 

At first blush, AQ and I were preparing for high-alert (which usually just means moving from the massage chairs in the TV room to the Laze-E-Boys in front of the trade screens), but we were soon able to return to Zimmer's weekly movie suggestion.  And although we could understand why HE liked it, we were hoping to have an excuse to stay with bonds as opposed to bondage...   We may, however, get that excuse soon enough though, courtesy of continued failure of futures to break through resistance.  To wit:

As we discussed last night, we'd need to wait for Friday to either confirm or reject the bearish indications in the candlestick chart.  So while we're up in price at the moment in futures, the last rally cycle shows a seemingly defeated bearish suggestion prove itself out in the sessions that followed.  In addition, if futures continue to be thwarted at 119-29, where else are they going to go?  In other words, they've shown the ability 2 times in the recent past to move LOWER from 119-29, but not once have they shown the ability to move higher (in the recent past that is...).  Sure, there's a first time for everything, but the moral of the story is we think "high alert" would be a better seat today than the one next to Zimmer and his special bag of popcorn.