Good Morning. First things first.....

I would like to congratulate Matt Graham on driving the four man U.S bobsled team to Olympic gold on Saturday night. That "Night Train" sled can move. WAY TO GO MG!!!

HAHA. Steven Holcomb looks just like MG though...its scary.

I suppose I have to acknowledge Canadian gold in hockey. That's all. Not even going to say who scored the game winner in OT. Here is a hint: he is not as good as Alex Ovechkin. Ok thats not a good hint because no player is better than Ovie. Here is another hint. He is the only hockey player to ever score a goal with his purse.

Here is another hint: CIDNEY SROSBY

Rates watchers enjoyed a bit of a corrective rally last week.  The 3.625% coupon bearing 10 year Treasury note went out on Friday +0-04 at 100-01 yielding 3.619%. Over the course of the week, yields fell from 3.80%  down to  3.62%.  The 2s/10s yield curve was 1 basis point flatter at 280bps on Friday and 14 bps flatter on the week.

The FN 4.0 went out +0-05 at 98-08 yielding 4.169% and the FN 4.5 closed +0-05 at 101-03 yielding 4.379%. The secondary market current coupon was 4.306%, down from 4.471% a week earlier. The current coupon was +68.7 basis points over the 10 year TSY note yield and 60.3bps over the 10 year swap rate. Yield spreads were slightly wider on the week, but nothing monumental. Yet.

The Week Ahead is not as busy as last week but there's still plenty on the calendar to move money with most attention centered on the Employment Situation Report, to be released on Friday. READ MND's THE WEEK AHEAD

We start if off with Personal Income and Spending data, released at 830.

Personal Spending rose 0.5 pct vs. +0.3 pct in December. This was just above the Reuters consensus forecast of +0.4 pct. Personal Income rose 0.1 pct in January vs. +0.3 pct in December, this print was also worse than the consensus call of +0.3 pct. Core PCE prices were +0.0055 pct, basically unchanged vs. +0.1 pct in December. The overall PCE price index was +0.1759 pct in January and the savings rate fell from 4.2 pct in December to 3.3 pct in January.

Inflation is still off the radar of most market watchers. Income did not rise as much as hoped but spending ticked higher...likely funded by savings (which explains the dip in the savings rate).  Disposable income fell thanks to an increase in federal nonwithheld income taxes.

Spending gains were nice to see but somewhat shallow because they were likely funded by savings. Wages and salaries did move higher too though...still this is not because of notable improvement in the the labor market.  Interest rates did like the tame inflation print though. Overall this was not a good or bad, mixed at best.

Following the release, Treasury futures prices broke the sideways overnight range and are currently testing Friday's high price.  Here is a short term range to work with...

In the cash market, the 10 yr note tested Friday's yield highs overnight, however after the date hit, yields fell a few bps. Nothing exciting though. The 3.625% coupon bearing 10 year TSY note is +0-03 at 100-04 yielding 3.608%. Look for 10s to retest 3.63% again this morning.

"Rate sheet influential" MBS coupons are playing follow the leader with benchmark big brothers. The FN 4.0 is +0-01 at 98-09 yielding 4.166% and the FN 4.5 is +0-00 at 101-03 yielding 4.379%. The secondary market current coupon is 4.304%,basically unchanged from Friday afternoon. The originator friendly trend channel is being put to the test today.

 A breakdown and move below 100-28 would have us considering a reprice for the worse alert.  If you missed the MBS WEEKLY, I updated our long term outlook and shared some thoughts on a double dip. READ IT HERE 

There were some developments over the weekend regarding the austerity of Greece. From the DJ newswire:

European Union Monetary Affairs Commissioner Olli Rehn said Monday the EU is ready to support Greece, but urged the country to take further measures immediately to shrink its bloated budget deficit.

"I am sure that together we shall overcome these formidable economic and fiscal challenges," Rehn said after a meeting with Greek Finance Minister George Papaconstantinou. "We will continue to support the Greek authorities and the Greek people so as to bring the economy back to a sustainable path."

While this is more jawboning than 'tradeable' action, take note how the bond market weakens when government officials flex their collective rescue muscles.

NEXT EVENT: Feb ISM and Jan Construction Spending

Our speculative strategy played out well last week, and while economic data was generally worse than expected, especially in housing, the long term bias toward higher rates is still in place. I do not expect rates to move much lower from here...chop chop bounce.