The 10 yr TSY note has officially recovered all of the post auction/profit taking incurred losses that occurred yesterday. Yields have rallied back to where they were following the stronger than expected 10  yr note auction on Wednesday. Since reaching these 6 week lows, the 10 yr hasnt budged, its been a tight range all afternoon. Volume is not horrible on the 10 yr, but it is well below yesterday and the day before which was to be unexpected on a mid-summer Friday the moment I show 581,000 10 yr contracts traded today/ compare that to the 800,000 we saw yesterday.

As we have rallied 70bps lower in the past month, be wary of profit taking as the 10 yr gets overheated, especially before bank earnings are released.....on the calendar next week:Goldman Sachs, JP Morgan, Bank of America, and Citi. Hmmm...anyone else think the highlight of these earnings will be trading revenues?

The 10 yr note has illustrated its bullish intentions...and is standing by waiting for confirmation, waiting for further guidance.

The newly awarded current coupon title belt holder, the FN 4.5, has followed the lead of its benchmark big brother and gone sideways in a tight range. Not before a little early afternoon action though...moderate supply from originators caused a little choppiness, but as predicted, calmer heads have prevailed and prices have returned to the top side of the intraday range. The FN 4.5 is currently +0-17 at 100-21 yielding 4.376 (10CPR) with 5.74 m.duration, and 7.57 year life. +216/5 yr TSY, +174/5yr IRS. Bps vols: 173. Where you got CC OAS?

Looks like "rate sheet influential" MBS coupons are set up for next week. Waiting for confirmation. Waiting for guidance...

In stocks, volume has been light all day as traders apparently snuck out early today (hmm...would you guys notice if we snuck out early?).The S&P continues to show weakness as the short term moving average (20 day) has once again fallen below the long term moving average (200 day)....right at 877. We can go deeper into technical analysis here but it would be overkill. The point is weakness persists in equites but next week the marketplace will be busy with inflation data and earnings releases.

Isnt it interesting that the S&P has moved to juuuust about its weakest levels of the week (bearish) and the 10 yr has ticked down to its lowest yield of the week (bullish)? Thats for good reason...because markets are in WAITING MODE...LOOKING FOR GUIDANCE...SEEKING CONFIRMATION!!!

Oh, and NYMEX crude prices still cant break $60. WAITING MODE!!!

Am I clear here? All markets are set up to continue current trends....seeking confirmation.

2s vs. 5s: 131bps

2s vs. 10s: 240bps

5s vs. 10s: 108bps