December economic review...

The market continues to be confused about the direction of the economy. After we rallied through 4.40% on tens early in December, we've now backed off over 25bps to 4.65% today. We've had two half point sell-offs in the last 5 days: on Friday the 22nd and today. Both were extremely light volume days.

I added some duration today. Not a lot, but I'm just not trusting this sell-off. My bet would be that we rally after January 1. I think the 25bps backup is borne out of technicals, not a real shift in market sentiment.

To this end, I took a look at all the U.S. economic releases of any significance so far in December. We can quibble over what constitutes a significant release, I used any release on which Bloomberg conducted a survey. I count 47 so far this month. 18 have come out stronger (or more inflationary) than in November, and 25 weaker. 4 were unchanged.

The picture isn't getting any clearer, so I'm betting that the recent trading range will hold. That means you're supposed to buy in at the high range and ride it down to the low range yield wise. We'll see if I'm right.