Rates went down today as the preponderance of the news is stabilizing: Greece sold (on it’s own strength — albeit with the now-presumed backing of the EU) a surprisingly strong bond auction — at about 4.55% — significantly down from the market rate of 7% several days ago.

Domestically, the prevailing feeling is that our own rates in the range of 4% are higher than warranted, and demand is flowing into US vehicles — thus suppressing the rates below this number — likely, for the short-term foreseeable future. Technically speaking, there is significant resistance around this range,  and “Ten-year Treasuries should trade within 3.7 to 4 percent for the next month or longer,” said William O’Donnell, U.S. government bond strategist at Royal Bank of Scotland Group Plc in Stamford, Connecticut. “At the end of the day what will break us out of the range will be inflation, inflation expectations and a break in unemployment. More and more people are listening to the Fed’s own thinking about benign inflation.”

The Labor Department will say tomorrow that consumer prices excluding food and energy rose 1.2 percent in March from a year earlier, the smallest annual increase since February 2004, according to the median estimate of 37 economists in a Bloomberg News survey. This adds to the prevailing feeling that inflation risks are low, which is bond-favorable, as high inflation eats into bond yields.

Nonetheless, in the longer term picture, confidence among U.S. small businesses fell in March to the lowest level since July 2009 as executives grew more concerned about earnings and sales, and our own spending picture is unwise for the financial future. There also remains a concern that our picture may shift to deflation “…given our view that developed economies have not fully healed and consumers are not yet ready to stand on their own two feet,” stated Michael Worah, head of the $18 billion Pacific Investment Management Co.

And globally, Greece is not out of the woods yet, however. Even though they are self-financing their own debt on a world marketplace, they still have significant debt problems AND a contracting economy. Cuts are needed just to get “even” — and even more cuts to make up for the decreasing GDP.

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