AT A GLANCE    (you like it when we do this?)

• GDP headline Slightly Better than expected at 5.9 vs 5.7, but tamer than expected inflation, and consumer spending.
  
• Those Internals, plus more news out of Greece, and the data yet to come on the day is helping keep bonds in the green until further notice
• MBS 4.5's are up 3 ticks at 101-02.  10yr Yield is right at 3.62
• No really definitive movements from either market!
• Plenty of data left to come including home sales. 
  
• Rally or Sideways seem to be the two dominate potentialities today, whereas "sell-off" seems far-off (for now)
• We'll let you know if a trend can form up after any of the next data sets that come out.  Have a great Friday!
  

As you can see, no major directionality has been able to form after this morning's GDP revision was slightly stronger than expected in the headline.  But the internals of the report, especially consumer spending and the various inflation metrics were bond friendly.  With renewed focus on the consumer situation combined with a consumer sentiment reading later in the day that follows hard on the heals of the abysmal consumer confidence reading earlier this week, There is some potential concession for that report in here, as well as the Existing home sales report for the same reason.  We also get Chicago PMI at 9:45.

Overnight, bond markets were fairly drama-free as a low-volume, and only moderate rally in Asian equity markets could not out-do ongoing concerns regarding Greek sovereign debt enough to force bonds lower.  In fact, Greece's PM responded to increasing pressure from EU countries to "take care of business" with the exceedingly reassuring (note sarcasm) statement to Greek Parliment in which he said "our worst fears have been confirmed."  Yikes!  Yeah, I don't think I would have offered a 10yr note yesterday either.  By morning, we were basically picking up where we left off the day before. 

Shortly after the open, GDP came across at 5.9% (this is a revision remember) vs 5.7% consensus.  Here are the internals of that report:

• +5.9 pct (consensus +5.7), prev +5.7 pct; final sales +1.9 pct (cons +2.0), prev +2.2 pct
• gdp deflator +0.4 pct (cons +0.6), prev +0.6 pct
• pce price index +2.3 pct (cons +2.7), prev +2.7 pct; core pce +1.6 pct (cons +1.4), prev +1.4 pct
• q4 consumer spending +1.7 pct (prev +2.0 pct), durables +0.2 pct (prev -0.9 pct)
• market-based pce price index +2.1 pct (prev +2.7 pct), core +1.2 pct (prev +1.1 pct)
• business investment +6.5 pct (prev +2.9 pct), equipment/software +18.2 pct (prev +13.3 pct)
• home investment +5.0 pct (prev +5.7 pct), bus. investment in structures -13.9 pct (prev -15.4 pct)
• q4 exports +22.4 pct (prev +18.1 pct), imports +15.3 pct (prev +10.5 pct)
• q4 gdp ex motor vehicles +5.6 pct (prev +5.2 pct)
• q4 year-on-year pce price index +1.2 pct (prev +1.3 pct), core pce +1.5 pct (prev +1.4 pct)
• business inventory change -$16.9 bln, adds 3.88 percentage point to gdp change (prev -$33.5 bln)

In other data, come and gone, KC Fed's Hoenig was out this AM with the following take-aways

• would be a "tragic mistake" to take away fed's power to regulate banking
• he's worried about debt levels, and thinks rates will have to be low for a long time in as a result
• US should bring up its savings rate, but not too quickly.

Also, not on most econ radar screens, ISM NY rose to best level in 3 years, though the "6 month outlook" fell from 97.0 to 81.

Later in the day, the report on Existing Home Sales will be more important than normal considering both the record low for new home sales yesterday and the noticeable pause in the recovery freight train.  Those who ascribe with any certainty to the notion that housing plays a role in the recovery will be watching (and trading) closely, so be ready for that

Overnight, volumes were fairly low and bonds were able to maintain the bid on the expectation that this morning's data would fall in line with several recent disapopintements, as well as the fact that Greece's PM responded to increasing pressure from EU countries to "take care of business" with the exceedingly reassuring (note sarcasm) statement to Greek Parliment in which he said "our worst fears have been confirmed."  Yikes!  Yeah, I don't think I would have offered a 10yr note yesterday either.

In both futures and cash, the 10yr treasury is at or near it's best levels in over 2 weeks.  The curve is much flatter too at 282 bps (early this week, we were over 290bps!!!  Record!!!).

BOTTOM LINE:  MBS and Treasuries have led off reasonably strong, especially in the face of better than expected data from ISM NY, and GDP revision.  But so far, the 10yr tsy yield HAS NOT been able to mount any sort of "try" at breaking below the 3.62 level, as we warned was a risk yesterday.  If that line in the sand holds, your first rate sheets of the day could be the best bet for the remainder of the day, thus increasing a lock bias on an yield back-up  or MBS Sell-Off.  We'll keep you posted on that critical level in Tsy's as well as anything else that looks like it's going to threaten our ability to hold this ground over 101-00 that we're enjoying today.