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This Week; its mostly about the treasury auctions and how well the bidding is when Treasury sells $99B of 2 yr, 5 yr and 7 yr notes Tuesday thru Thursday. Last week the bond and mortgage markets ended better on the week but the action thru the week was volatile. Tuesday thru Thursday markets were much more active; the continual failures of the 10 yr note to break 3.14% on a close finally shot up on more technical reasons than anything else; the Fed minutes confirmed the the Fed would is not and will not consider further easing as the economy stands now. The debate in the 4.27 FOMC meeting was mostly about the first potential tightening. With the tachnical failure and the FOMC minutes rates shot up. Then Thursday's economic data weaker than forecasts, capped by the shockingly weak Philadelphia Fed economic report. Bonds and mortgages improved through the close on Friday, the 10 yr -2 bp on the week and mortgage markets were essentially unchanged also.

This Week Treasury auctions and increasing re-curing concerns about Greece's debt along with the performance in US equities should set up a more volatile week. Another attempt that fails to push the 10 yr note lower in rate this week will do serious damage to the outlook that rates may trend lower. Economic data won't be much help this week with weekly claims, durable goods orders for April and April personal income and spending about all there is. The constantly developing debt problems in Europe, its impact on the dollar/euro, and what appears to be a weakening equity market; all these will play momentary acts through the week. Our technical work remains slightly bullish but is losing ground quickly; unless the 10 yr note moves below 3.10% this week rate markets are likely to begin increasing somewhat.

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