Good Morning. My stomach is rumbling after having to force down several helpings of crow.

The Canadian hockey team absolutely dismantled the Russians last night. This is pretty much exactly what I did not want to happen. Not because I dislike Canada or like Russia, it's more personal. I am not a big supporter of Sidney Crosby. I am a huge fan of Alex Ovechkin (he is a Washington Capital).   If you have no clue what I am talking about, I went on quite a rant yesterday about this. HERE IT IS

Anyway. I was wrong. Canada was dominant. Crow eaten.

The 3.625% coupon bearing 10 year Treasury note went out -0-01 at 99-14 yielding 3.693%.

The FN 4.0 ended the day 0-03 at 97-24 yielding 4.215% and the FN 4.5  closed -0-02 at 100-23 yielding 4.423%. The secondary market current coupon was 4.381%. The current coupon yield spread was wider on the day. Here is the relative value scorecard: +68.8 basis points over the 10 yr TSY note yield. +60.2 basis points over the 10 year swap rate. The yield curve got crushed yesterday.

Ignoring weak housing data, the S&P bounced at a key support level, 1095.

After stepping out of the spotlight for a few days, Greece has made its way back to front page headlines.  Yesterday the S&P warned that Greece's sovereign credit rating was subject to another downgrade. Early this morning Moody's released a similar statement, saying unless Greece meets budget deficit reduction objectives, their sovereign debt rating may be cut.  The Wall Street Journal found this to be an opportune time to publish a story adding to the contagion: EURO'S NEXT BATTLEGROUND: SPAIN

This is nothing new to money managers, but its still creating a stir in the media an being leaned on a reason behind equity weakness and a flight to safety into Treasuries. Adding to this sentiment was 830AM jobless claims data.

The number of Americans filing for first time unemployment benefits rose unexpectedly last week. Weekly jobless claims came in at 496,000 vs. previous 474,000. The market was expecting 455,000. Durable goods orders were up 3.0% in January vs. 1.9% in December ...economists had forecast +1.5%, so this data was better than anticipated.  

The surprise jump in new claims boosted bullish momentum for interest rates. I haven't looked at the data in detail yet, so I am not sure if traders are really reacting to higher claims or health care coverage or everything combined. If I see anything interesting I will inform.  If you see something...please share.

The 3.625% coupon bearing 10 year TSY note is currently +0-15 at 99-29 yielding 3.639%. Lately  I have been using Fibonacci retracements as a technical guidance giver, with Dec.21 being my base. This morning 10s have moved down to 3.64%, this is the 62% retracement of the Dec.21 selloff. These retracement levels are reliable at the moment. A break below 3.64 and we test 3.60 then 3.57.

 The FN 4.0 is +0-11 at 98-03 yielding 4.183% and the FN 4.5 is +0-06 at 100-29 yielding 4.401%. The secondary market current coupon is 4.347%. Yield spread scorecard: CC is +70.4/10yr TSY and +62.4/10 yr swaps.

One story we'll be telling next week is how this week presented several worse than expected econ prints. When you combine the corresponding flight to safety (bc of weak econ data) with oversold technical indicators and real money bargain buying...you get a healthy, originator friendly bounce in rate sheet influential benchmarks. Whether or not its just a test of bearish biases or a confirmation of bullish sentiment that kept 3.57 to 3.71 intact is yet to be seen....

If you are floating, stay defensive of gains! This rally has been a function of a flight to safety plus forced buying (short covering) plus a tag along real money bid. Nothing has been confirmed, this break below 3.71% must be sustained. Stock lever in play.