Showing themselves to be content to march to the beat of their own drummer, bonds continue to hold relatively stable levels despite a stock market that has rallied somewhat off it's morning lows. 10yr yields are at 3.505 and FNCL 4.5's 101-17. No risks of reprices for the worse, and to reiterate previous notes, we could see reprices for the better (in small amounts) the longer this ground-holding/rallying persists in bonds. But keep an eye out today for volatility.

The initial mini-knee-jerk reaction to slightly stronger than expected econ data resulted in new lows for bonds. But they quickly stabilized and have since edged back into what had been the outer limits of their morning range. For treasuries, the outer limits are currently on the weak side around 3.513, but MBS are actually at their highs of the day. If these levels hold here or improve, reprices for the better (small ones) MIGHT be seen today. Let's not count chickens however... The point is that we're not rushing for the lock button right now. Whether or not that changes in the next five minutes is another matter. It's been a pretty choppy morning.

FNCL 4.5's fell to 101-11 from 101-15 after a report showed that factory orders in the US were up 0.2% versus a consensus of -0.5% and the Institute for Supply/Management's index of business activity and their Purchasing Managers Index both beat expectations. The initial move weaker may prompt a jumpy lender to consider repricing for the worse, but the market is potentially already showing signs of stabilizing. Trading is brisk and things could still go either way.

+0.2 PCT (CONSENSUS -0.5 PCT) VS NOV +1.3 PCT (PREV +0.7 PCT) /// DURABLES ORDERS REVISED TO -2.3 PCT FROM -2.5 PCT /// NONDEFENSE CAP ORDERS EX-AIRCRAFT REVISED TO +1.9 PCT FROM +1.4 PCT /// EX-TRANSPORTATION +1.7 PCT VS NOV +3.3 PCT (PREV +2.4 PCT) /// EX-DEFENSE +0.2 PCT VS NOV +0.9 PCT /// NONDURABLES ORDERS +2.3 PCT VS NOV +2.5 PCT /// COMPUTERS/ELECTRONIC PRODUCTS ORDERS -0.2 VS NOV +6.7 PCT /// TOTAL MANUFACTURING INVENTORIES +1.1 PCT VS NOV +0.9 PCT /// INVENTORIES/SHIPMENTS RATIO 1.26 MONTHS' WORTH VS NOV 1.27 MONTHS

PMI AT 59.4 IN JANUARY (CONSENSUS 57.0) VS 57.1 DEC /// BUSINESS ACTIVITY INDEX 64.6 IN JANUARY (CONSENSUS 62.3) VS 62.9 IN DEC /// PRICES PAID INDEX 72.1 IN JANUARY VS 69.5 IN DECEMBER /// EMPLOYMENT INDEX 54.5 IN JANUARY VS 52.6 IN DECEMBER /// NEW ORDERS INDEX 64.9 IN JANUARY VS 61.4 IN DECEMBER

In the past 30 minutes, bonds have weakened at their quickest pace of the day, pushing out toward the very last lines of defense for "the range." 10yr yields are up to 3.535 and FNCL 4.5's fell to 101-13. It bears repeating that it's not uncommon for the market to get aggressive with "lead-offs" before important econ data and/or events. That doesn't mean anything about how things will turn out tomorrow, but it does mean that NFP would have to confirm what we're seeing this morning, or it will simply look like a failed test to break out of the range.

At 3.511, 10yr yields are currently inside their morning extremes of 3.49 and 3.52. Similarly, FNCL 4.5's are at 101-16 with the lows at 101-14 and 101-18.

Following the 830am data (Jobless Claims and Productivity/Costs), the bond market rallied slightly, with 10yr yields moving down to 3.49 from 3.52. FNCL 4.5's ticked up to 101-18 from 101-14. But moments later, and both markets are right back to their previous levels. More econ data is on the way at 10am.

Q4 NON-FARM PRODUCTIVITY +2.6 PCT (CONS +2.0 PCT) VS Q3 +2.4 PCT (PREV +2.3 PCT) /// UNIT LABOR COSTS -0.6 PCT (CONS +0.3 PCT) VS Q3 -0.1 PCT (PREV -0.1 PCT) /// PRODUCTIVITY +3.6 PCT, LARGEST RISE SINCE 2002, VS 2009 +3.5 PCT /// UNIT LABOR COSTS -1.5 PCT VS 2009 -1.6 PCT

US JOBLESS CLAIMS FELLL TO 415,000 JAN 29 WEEK (CONSENSUS 420,000) FROM 457,000 PRIOR WEEK (PREVIOUS 454,000) /// US JOBLESS CLAIMS 4-WK AVG ROSE TO 430,500 JAN 29 WEEK FROM 429,500 PRIOR WEEK (PREV 428,750) /// US CONTINUED CLAIMS FELL TO 3.925 MLN (CON. 3.92 MLN) JAN 22 WEEK FROM 4.009 MLN PRIOR WEEK (PREV 3.99 MLN) /// US INSURED UNEMPLOYMENT RATE FELL TO 3.1 PCT JAN 22 WEEK FROM 3.2 PCT PRIOR WEEK (PREV 3.2 PCT)