Stock markets are quietly trading (low volume) higher after construction spending and pending home sales data came in better than expected. Stocks have however capped gains and stayed in a tight range after the release of 10am economic data. The Dow did fall off its intraday highs following the release of President Obama's new corporate tax initiative that reforms domestic firm's ability to offset their taxable income with overseas investments. Major US firms brashly oppose this policy stating it will limit US competitiveness and cause further job losses at a time when the economy is just beginning to pick up corrective momentum.

So where's the money going?

The short end of the Treasury market is receiving a good amount of attention as market participants appear to be employing a "sit on the sidelines" strategy until the results of stress tests are announced  on Thursday and Non Farm Payrolls data is released on Friday.  That strategy is being carried out in 3m and 6m Treasury bills, whereas the longer end of the curve continues to range trade in a low volume marketplace....

The MBS market remains stuck in its recent range...too weak to make notable gains...too strong to let prices move below that long term 99-23/24 supportive price level. The upcoming Treasury auctions combined with the Fed's apathetic attitude towards the steepness of the yield curve is limiting our upside potential.

Feels like we are going to stay stuck in this range in the absence of Treasury supportive headline news...anything over 100-00 brings about profit taking. Any prices below 99-23 brings on buying.....

Since 5pm "Going Out"  Marks....

FN30________________________________

FN 4.0 -------->>>> +0-04  to  99-29  from 99-25

FN 4.5 -------->>>> +0-04  to 101-22  from 101-18

FN 5.0 -------->>>> +0-02  to 102-22  from 102-20

FN 5.5 -------->>>> +0-01  to 103-15  from 103-14

FN 6.0 -------->>>> +0-01  to 104-16  from 104-15

GN30________________________________ 

GN 4.0 -------->>>> +0-02  to 99-29     from 99-27

GN 4.5 -------->>>> +0-03  to 101-29  from 101-26

GN 5.0 -------->>>> +0-02  to 103-10  from 103-08

GN 5.5 -------->>>> +0-02  to 103-25  from 103-23

GN 6.0 -------->>>> +0-02  to 104-10  from 104-08

UST10YR: 3.1743%

2s/10s: 223.57 bps

DOW: +182 to 8395

Many media stories (FT) have emerged that Citi and Bank of America have failed the government's "Stress Tests". Bank of America has come out and stated this is "completely inaccurate". The whispers/rumors that are expected to circulate regarding the results of stress tests are just another reason why investors will be hesitant to allocate funds with any conviction this week .

Buy the rumor sell the news continues to distort perceptions. Stay Nimble!