Somewhat of a quiet start this morning; early on the 10 yr note traded +5/32 at 3.69% with mortgages unchanged. At 8:30 the data on the NY Fed Empire State manufacturing report put some support in the stock indexes and pushed bond prices back to unchanged. The DJIA prior to the 8:30 report traded off 37 points, on the data the DJIA still weak but only off 16 points. At 9:00 the 10 +3/32, mortgages +1/32 (.03 bp) and the DJIA futures index -17. At 9:30 the stock market opened fractionally better, after trading lower all morning the DJIA opened a little better but the NASDAQ and S&P were slightly weaker.

The NY Empire State manufacturing index was up for the eighth month in a row although weaker than in Feb. The overall index was expected at 21.45 it came in at 22.86 compared to 24.91 in Feb. New orders component increased to 25.43 frm 8.78, employment component at 12.35 frm 5.56 and prices pd fell to 29.63 frm 31.94. Any index reading over zero is considered expansion.

More data at 9:15; Feb industrial production, expected unchanged, was up 0.1% compared to +0.9% in Jan. Feb capacity utilization, expected to be unchanged at 72.6%, was up a little to 72.7%. There was no reaction to either report in stocks or bonds.

This Week's Economic Calendar:

             Tuesday;

                8:30 Feb housing starts and permits (starts -3.5%, permits -3.2%)

                       Feb import and export prices (N/A)

                2:15 FOMC policy statement

            Wednesday;

               7:00 weekly MBA mortgage applications

               8:30 Feb Producer Price Index (-0.2%; excluding food and energy components +0.1%)

            Thursday;

               8:30  Feb Consumer Price Index (+0.1%; excluding food and energy components +0.1%)

                       Weekly unemployment claims (450K down 12K; continuing claims 4500K frm 4558K)

                       Q4 Current Account Balance (-$120B)

              10:00 Feb Leading Economic Indicators (+0.1%)

                       Mar Philadelphia Fed business index (18.0 frm 17.6 in Feb)

            Friday;

                      (no data)

The clock is ticking on the end of the MBS buying by the Fed, and the expiration of the homebuyers tax credit at the end of April. With the government exiting direct assistance to the mortgage and housing markets there are many worried it will curtail any additional improvement in the sector as mortgage interest rates will increase and with no additional incentives would-be borrowers will back away. It all depends on the employment sector; if new jobs begin to appear that would offset the loss of the homeowners tax credit. We are already hearing some interesting forecasts for the employment estimates, one economist at Morgan Stanley is forecasting 300K new jobs created in March. If he is correct markets will take it and run, interest rates will increase and equity markets will rally. Jobs are the key to the housing sector's rebound; until the employment markets stabilize the economic outlook will remain clouded.

The bond and mortgage markets should be quiet again today with the FOMC meeting tomorrow and the statement release at 2:15. We expect a change in the wording on how long the Fed will keep rates low, there is increasing concern at the Fed that the "extended period" used to define how long rates will remain low doesn't provide much wiggle room for the Fed. Fed district presidents, members of the FOMC want to change the wording to allow for the fed to move ore rapidly if needed. Any wording change gets excessive debate, going round and round on what the Fed "really" means. A waste of breath; traders and markets will know well before the Fed moves that it will begin tightening. In the meantime it makes for interesting chatter.

Last week mortgages were literally unchanged; this morning starting flat again. Today should not see much change in prices on treasuries or mortgages. The economic data earlier this morning has already been discounted and with the FOMC meeting tomorrow both stocks and bond markets are likely to be quiet. If however, the equity markets get a head of steam up the rate markets will react accordingly