With only 26 minutes having passed since the data that threatened to push bonds out of their recent range, we're still in the "so far so good" stages of a potentially developing support bounce for bonds that could be marked in line with the highest 10yr note yields this month at 3.42. Since ticking into that level momentarily, yields are back to hovering around 3.41 as the S&P slid from 1281 to 1275, in line with it's weakest levels just after the open. If stocks bounce here and make some sort of strong "double bottom," bonds may take this negatively enough that the prospects of rallying off a support bounce are grim. It's still very much anybody's game so far this morning, but at least we're IN the game. FNCL 4.5's are at 102-04.

Bond markets weakened slightly following the release of 7am econ data. 10yr yields moved to test a band of high yields ranging from Tuesday's highs just under 3.41 and highs from the 12th just over 3.41. So far, that support is holding, but it's too early to say if this will continue to be the case. Reprice pressure exists among lenders that already released rates this AM, and increasingly so if 10's crest 3.41 and 4.5's approach 102-00

U.S. DEC LEADING ECONOMIC INDICATORS INDEX AT RECORD HIGH 112.4 (Source: Reuters)

NEW ORDERS INDEX 23.6 IN JAN VS 10.6 IN DEC // PRICES PAID INDEX 54.3 IN JAN VS 47.9 IN DEC // EMPLOYMENT INDEX 17.6 IN JAN VS 4.3 IN DEC // 6-MONTH BUSINESS CONDITIONS INDEX 49.8 IN JAN VS 55.4 IN DEC

US DEC EXISTING HOME SALES +12.3 PCT (CONS +4.8 PCT) VS NOV +6.1 PCT (PREV +5.6 PCT)-NAR // US DEC INVENTORY OF HOMES FOR SALE -4.2 PCT TO 3.560 MLN UNITS, 8.1 MONTHS' SUPPLY-NAR // US DEC NATIONAL MEDIAN PRICE FOR EXISTING HOMES $168,800, -1.0 PCT FROM DEC 2009-NAR // US NAR SAYS 36 PCT OF U.S. DEC EXISTING HOME SALES WERE DISTRESSED SALES VERSUS 33 PCT IN NOV // US 2010 EXISTING HOME SALES -4.8 PCT TO 4.908 MLN UNITS, LOWEST SINCE 1997, FROM 5.156 MLN IN 2009 // NAR CHIEF ECONOMIST YUN FORECASTS 2011 EXISTING HOME SALES AT AROUND 5.2 MLN UNITS

10yr notes may be a few thousands away from their weakest levels of the morning, but the same is not holding true for 5yr notes or 4.5 FNCL's. Both are currently testing those lows with the 5yr at 1.9998 and FNCL 4.5's just a shade over 102-05.

10yr yields did encounter their first meaningful support at the previously discussed 3.407 level, but on the rebound, a somewhat well-traveled pivot this week (3.37+) is offering some resistance. This sent yields back in the 3.40+ direction but the story has yet to play out. It might not play out before 10am data, and even if it does, it's likely that 10am data will take yields outside of this narrow morning range-bind.

In a little less than an hour, 3 more pieces of economic data will be released. Existing home sales for December is forecast to be up 4.8% to an annual pace of 4.85 million. November printed up 5.6% at 4.68 million. Leading indicators are seen coming in at 0.6%, a half a point drop from Novembers 1.1%. Finally, Philly Fed's business index is also forecast to have dropped half a point from 20.8 to 20.3. The range of estimates on the latter was 12.5 - 26.4

Using 10yr notes as a benchmark, there are two support levels to watch as rates move higher this AM. The first, and most recent, is the point that began the 2-day trend channel lower in yields at 3.4072. This level is effectively so far being tested and although the outcome remains uncertain, has at least been supportive so far. After that, the next highest yield seen in recent weeks came on the 12th when 10's hit 3.4178. This band of yields near 3.40 marks the midpoint for a larger 2011 range between 3.3 and 3.5

10yr yields zoned in at 3.36 this morning before jobless claims data and in the few minutes since the release printed better than expected results, they are up to 3.38, in line with yesterday's highest yields. FNCL 4.5's are at 102-08, down 4 ticks from last night's close, setting the stage for weaker pricing this morning.

US JOBLESS CLAIMS 4-WK AVG FALLS TO 411,750 JAN 15 WEEK FROM 415,750 PRIOR WEEK (PREVIOUS 416,500) // US JOBLESS CLAIMS 4-WK AVG FALLS TO 411,750 JAN 15 WEEK FROM 415,750 PRIOR WEEK (PREVIOUS 416,500) // US CONTINUED CLAIMS FALL TO 3.861 MLN (CON. 3.925 MLN) JAN 8 WEEK FROM 3.887 MLN PRIOR WEEK (PREV 3.879 MLN) // US INSURED UNEMPLOYMENT RATE UNCHANGED AT 3.1 PCT JAN 8 WEEK // US CONTINUED CLAIMS LOWEST SINCE OCT 2008 (Source: Reuters)