S&P/Case-Shiller home price data and Consumer Confidence were both bond market  friendly this morning.  Yet the bond market did not react logically to the news.

The 20 city home price index fell 1.3% vs. calls for a 0.6% MoM decline vs. the previous read of -0.8%. YoY the 20 city index was down 0.8% vs. median estimates for -0.1% YoY. “The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October’s report. Home prices across the country continue to fall.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. “ For more on the looming double dip in home prices, check out the full story on Case/Shiller. 

Consumer Confidence fell to a much worse than expected 52.5 vs. the previous print of 54.1. The Present Situation Index declined to 23.5 vs. an upwardly revised 25.4 in November. Here is the Reuters Quick Recap...

RTRS- DEC CONSUMER CONFIDENCE INDEX 52.5 VS NOV REVISED 54.3 (PREVIOUS 54.1) - CONFERENCE BOARD

RTRS- CONSUMER CONFIDENCE INDEX MEDIAN FORECAST FROM REUTERS FOR DECEMBER WAS 56.0

RTRS- CONSUMER PRESENT SITUATION INDEX IN DEC 23.5 VS NOV REVISED 25.4 (PREVIOUS 24.0)

RTRS- CONSUMER EXPECTATIONS INDEX 71.9 IN DEC VS NOV REVISED 73.6 (PREVIOUS 74.2) - CONFERENCE BOARD

RTRS- JOBS HARD-TO-GET INDEX 46.8 IN DEC VS NOV REVISED 46.3 (PREVIOUS 46.5) - CONFERENCE BOARD

RTRS- 1-YEAR CONSUMER INFLATION RATE EXPECTATIONS 5.3 PCT IN DEC VS NOV 5.1 PCT (PREVIOUS 5.1 PCT)

Here's a historical chart of Consumer Confidence with an overlay of Pending Home Sales (which we'll get on Thursday) for perspective:

While this poor economic data seems like it would support a bond market rally, it just isn't playing out, not in this BID WANTED environment. Instead, with trading volumes even lower than they were yesterday, the bond market is working on a standard issue concessionary yield back-up before today's 1pm auction deadline.  First priority is clearly the auction concession and we're seeing it via short selling (money flows up. volume rising into selloff. prices declining = SHORT SELLING) Just to be clear, don't misread "rising volume" as a sign that activity is brisk or heating up. Trading has been and continues to be extremely thin. This price action is exaggerated by a lack of liquidity. Yields are meandering from pivot to pivot freely, without much resistance.

Here's a look at where MBS and Treasuries sit in the minutes following the report. 

10yr TSYs..

As far as those support bounces are concerned, they seem to be occurring in line with last night's hourly treasury chart which had an overall range of the 3-month-long back-up in rates with the 2 inside lines marking 38 and 62% retracements. 

NOTE: over 50% of yesterday's treasury volume occurred in 2's!  In other words, yesterday was really all about the auction.  And although we are getting a brief nod to AM data here, volume thus far promises to be similar to yesterday's (which was the lowest day of the year).  So we can expect that the 5yr note auction will be the order of the day when it hits at 1pm.

re: "BID WANTED". AQ had this to say on TSY auctions this AM.

It is not uncommon for dealers to only bid on TSY offerings RIGHT BEFORE the 1pm bid cutoff. This is exactly what happened yesterday. The "When Issued" 2-year note went "bid wanted" all the way into the 1pm bid deadline before dealers submitted their bids all at once (covered short positions). This allowed for a larger concession to be priced in which gave dealers the best deal possible on their 2-year note purchases.

$35 billion 5s at 1pm.