Market Analysis

Bond markets recovered during the afternoon yesterday despite better than expected data on Initial Jobless Claims for the week ended 12/25/10 (came in below 400,000 for the first time in two years), the December Chicago Purchasing Manager's Index (came in at 68.5 vs expectations for a 61.5 reading) and November Pending Home Sales (up 3.5% vs expectations for them to be down by 3%).

The economic calendar is vacant today.  Bond trading is extremely light and the few trades being made have a slight positive bias.  Next week will be a totally other story though as investors begin to place their bets on whether or not the US economy will recover enough to create jobs and on what level of demand there will be for the continued large US Treasury auctions.  Additionally investors will try to identify whether the European debt scare has really passed or whether there is more to worry about and to what extent commodity inflation caused by growth in China and in other emerging economies will spill over into the US.