No follow-through from the small rally yesterday. Treasuries and mortgages opened weaker this morning with the stock market pointing to a better open at 9:30. At 9:00 the 10 yr note -13/32 3.66% +4 BP; mortgage prices -6/32 frm yesterday's close. At 9:30 the DJIA opened +70, the 10 yr -12/32 3.65% +4 BP and mortgages -6/32 (see below for 10:00 levels).

No economic data today; the day is total focus on Ben Bernanke's testimony to the House Financial Services Committee that begins at 10:00. The Fed chief is required to go to both houses of Congress twice each year to report on monetary policy and the economy. Today at the House tomorrow at the Senate. The main issue today may be Bernanke's exit strategy from the quantative easing polices that has exploded the Fed's balance sheet and lit inflation concerns. No reason to worry now about inflation but when the economy actually begins to improve (not likely until well into 2010), but when it does markets will increase inflation concerns unless the Fed has a plan to curtail it. One way of course would be increasing the Fed funds rate, tightening credit. However, the Fed has more ammo it can use along with increasing short term interest rates.