Morning Stuff

Following Friday’s very unclear labor report and 3 weeks into earnings season, the news flow tapers off a bit until getting active again next week when important inflation figures get reported. With bond yields continuing higher, the Treasury sells 3 yr, 10 yr and 30 yr paper this week as an important test of market sentiment. With the Fed mostly focusing their secondary market asset purchases on the newer issues, dealers will likely be active knowing they can flip to the Fed. In response to last week’s 32 bps rise in the 10 yr note yield, said the average 30 yr mortgage rate rose to a one month high at 4.96%. With still no agreement within the EU on how to structure a reworking of the original EFSF program, the Portuguese 10 yr yield is back above 7%. German factory orders unexpectedly fell in Dec and the euro is lower vs the US$ as a result.

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