Our benchmark FNMA 6.0% mortgage bond continues to wind up within a sideways pattern of consolidation while attempting to break above long-term resistance at the 200-day MA. The longer this sideways trading action takes, the more volatile the next price breakout will be. The bond traded in a little wider 40bp range before ending with a 16bp gain to close at $101.31, a tick higher than the 200-day MA located at $101.27. The bond traded as high as $101.53 before a late-day spurt by the stock market helped reign in bond prices. The day's overall economic news was mostly dreadful while inflation at the wholesale level was 'mixed.' The Producer Price Index (PPI) fell by a record -2.8% vs. a consensus of -1.9% in October, the largest monthly decline in 61 years. Plunging gasoline prices were a major factor, falling by a record 25%. However, after excluding volatile energy and food prices, the Core PPI increased by a hotter than forecast 0.4% vs. expectations for only a 0.2% rise. The International Council of Shopping Centers/Goldman Store Sales Index measuring same-store sales at major retail chains showed a week-over-week increase of 0.3%, up from the prior week of -1.0%. Year-over-year sales however, slipped to -0.1% from 0.4%. The Treasury International Capital report showed Net Foreign Purchases of U.S. securities of $66.2 billion in September. The strong level of foreign buying included a net $15.8 billion in longer-term bonds and $11.5 billion in stocks. The National Association of Home Builders reported its November Housing Market Index at a record low of 9, surpassing the previous historical low of 14 in October. The news gave bond prices a temporary boost following the release. On the credit front, the three-month dollar LIBOR rate edged lower to 2.22% from yesterday's rate of 2.24%. Chief executives of Chrysler, Ford, GM, and the UAW made their pitch for a government bailout at a U.S. Senate Banking Committee hearing and Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson were grilled by members of the House Financial Services Committee about the sudden change in strategy of the $700 billion TARP financial bailout program. The strategy was suddenly changed last week from buying bad mortgage assets to buying direct equity stakes in banks. Hewlett-Packard was a beacon of light for the stock market after announcing it would beat earnings estimates for the 4th Qtr. and fiscal year. The Dow benefited with a 151 point gain to close at 8,424. The broader S&P 500 Index added 8 points to finish at 859 while the NASDAQ Composite Index edged 1 point higher to end at 1,483.