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Yesterday there was little change in the bond and mortgage markets; the stock indexes were weaker but volume was thin. Yesterday the April Philly Fed business index and March leading economic indicators were two more data points that were weaker than expected. The Philly Fed index of business activity revealed there is no improvement in the business sector in the NE. Leading economic indicators were expected to be +0.2%, the LEI fell 0.1%. The soft data continues to be the prevalent case for most data recently. Nevertheless the stock market so far has held well and the bond market has held its recent rallies. Even on days when the stock market experiences selling the 10 yr note has not demonstrated much improvement. There are no scheduled economic releases today. US financial markets little changed this morning ahead of the 9:30 open in the stock market. Prior to the open the 10 yr note slightly weaker in price but essentially unchanged while 30 yr MBS prices also about unchanged. At 9:30 the DJIA opened -45, NASDAQ +8, S&P +4; 10 yr note a 1.71% +2 bp, 30 yr MBS price unchanged. Not much news today from Europe; the key stock markets in the region are better. Most of the coverage this morning has been about the Boston bombers; one dead, the other being hunted. Citizens told to stay inside, about a million people have been told to stay put, in homes of offices. So far the horrific bombing hasn’t filtered into the stock or bond markets. The bellwether 10 yr note is still unable to break below 1.69% on a closing basis, equally the note hasn’t shown much negativity as the yield on the note remains within a six basis point range (1.75% to 1.69%) over the last nine trading days. Conventional wisdom is that when (if) the stock market began to experience selling that the US interest rates would fall, so far neither has occurred. The stock market has been more volatile with huge swings in both directions but not much decline so far. The fear of inflation, more imagined than real, may be keeping the 10 yr falling more; however inflation is a dead soldier these days. US annual inflation is below the Fed’s 2.0% target (+1.5%) and has a few Fed officials now talking about more easing to boost the rate back to 2.0%. China’s economic slowdown also suggests no inflation, Europe’s inflation rate is declining. This morning Canada reported its inflation rate slowed to the bottom of the central bank’s target range last month as gasoline prices dropped. The consumer price index rose 1% in March from a year ago following a 1.2% gain the prior month, Statistics Canada said. The core rate, which excludes eight volatile products, was unchanged at 1.4%. The Bank of Canada said April 17 inflation will remain below policy makers’ 2% target until the second quarter of 2015 as slower growth creates more slack. Fears of inflation have eroded, eliminating one impediment for lower long term rates. No inflation, weakening economic data, a mixed picture on Q1 earnings reports, and an increasing number of economists saying Q2 growth may slow. The job markets very soft (ignore the decline in the unemployment rate). China’s economy the weakest in 13 years, Europe about to re-enter recession. All of this has yet to seriously impact US stock indexes and the bond and mortgage markets. Technically though stocks, bonds and MBSs still hold bullish biases; the 10 has room to increase to 1.75% and still hold positive, 30 yr Fannie Mae 3.0 coupon price has stalled the last five sessions but is still above its 100 and 200 day averages. Technicals look OK, but are increasingly more vulnerable.