FNCL 4.5's are 2 ticks better at 101-08 following Business Inventories and Sales data released at 10am. S&P's dropped about a point and 10yr yields fell to 3.52 before bouncing back up to 3.524. This was the last piece of scheduled economic data before this afternoon's 10yr Treasury auction at 1pm which is expected to be the next major market mover of the day.

* U.S. FEB BUSINESS INVENTORIES +0.5 PCT (CONSENSUS +0.8 PCT) VS JAN +1.0 PCT (PREV +0.9 PCT) * U.S. FEB BUSINESS SALES +0.2 PCT VS JAN +2.0 PCT (PREV +2.0 PCT) * U.S. FEB INVENTORY/SALES RATIO 1.24 MONTHS' WORTH VS JAN 1.24 MONTHS * U.S. FEB BUSINESS INVENTORIES AT $1.458 TRLN, HIGHEST SINCE DEC 2008 ($1.476 TRLN) * U.S. FEB BUSINESS SALES READING WEAKEST SINCE JUNE 2010 (-0.4 PCT)

Simply put, European banks are going to need more capital The International Monetary Fund said today. The IMF further warned "It is imperative that weak banks raise capital to avoid a pernicious cycle of deleveraging, weak credit growth, and falling asset prices." The debt set to mature over the next few years is of particular concern. But the warnings weren't limited to Europe. The IMF said that US and Japan were also "Living Dangerously," citing the delicate dance of managing deficits without adversely impacting the economic recovery. "While the United States and Japan continue to benefit from low current (borrowing) rates, both are very sensitive to a potential rise in funding costs," it said.

"Slightly" really is the operative word here... Any time the charts make that straight-down kinda movement, things can look a bit grim, but note the fairly narrow range over the past 2 days. The entire chart in FNCL 4.5's only covers 9 ticks. This morning's drop from the time of retail sales to now? A mere 2.5 ticks... Not too shabby, especially considering that benchmark 10yr notes have made several supportive bounce-type moves before breaking through yesterday's high yields around 3.54. Even then, we'd be OK seeing 10's up to 3.55/56 this morning ahead of the auction. Then there's the auction! Looks like that's where volume will be focused today as this morning's data really hasn't drawn out nearly as much as yesterday morning over the same time period. So if the auction is positive for bond markets, the fragile and ethereal hope of a broader rates rally remains. Levels: FNCL 4.5's down 6 ticks at 101-07. 10yr note yields up 4.17 bps at 3.5337.

*JPMORGAN CHASE: WE EXPECT CONSENT ORDER FROM OCC AND FED ON MORTGAGES LATER TODAY * JPMORGAN CHASE: WE EXPECT CONSENT ORDER TO ADDRESS WEAKNESSES IN CONTROLS AND ISSUES ON FORECLOSURE AFFADAVITS * JPMORGAN CHASE: EVENTUALLY I'M SURE THERE WILL BE PENALTIES ON FORECLOSURE MATTERS * JPMORGAN CHASE CEO: A GOOD GLOBAL FORECLOSURE SETTLEMENT WOULD BE GOOD FOR EVERYBODY, INCLUDING HOUSING MARKET * JPMORGAN CHASE CEO: IT IS POSSIBLE THAT SOME OF THE FORECLOSURE SETTLEMENTS WITH THE GOVERNMENT COULD INCREASE COSTS OF MORTGAGES TO CONSUMERS -MEDIA CONFERENCE CALL

* US MARCH RETAIL SALES +0.4 PCT (CONSENSUS +0.5 PCT) VS FEB +1.1 PCT (PREV +1.0 PCT) * US MARCH RETAIL SALES EX-AUTOS +0.8 PCT (CONS +0.7 PCT) VS FEB +1.1 PCT (PREV +0.7 PCT) * US MARCH RETAIL SALES EX-GASOLINE +0.1 PCT VS FEB +0.9 PCT * US MARCH RETAIL SALES EX-AUTOS/GAS/BUILDING MATERIALS +0.4 PCT VS FEB +1.1 PCT * US MARCH GASOLINE SALES +2.6 PCT VS FEB +2.4 PCT * US MARCH CARS/PARTS SALES -1.7 PCT VS FEB +1.0 PCT * US MARCH RETAIL SALES READING WEAKEST SINCE JUNE 2010 (-0.3 PCT)