Iran blinked. That is the good news of the day. Iran’s President Mahmoud Ahmadinejad – which should be pronounced, My-mood, I’m-in-a-mood-for-a-jihad – said that Iran would free the 15 kidnapped British sailors and Marines. I’m-in-a-mood-for-a-jihad said that it is a "gift" to the British people. I’m waiting for a bank robber to try that when caught and returns the money as a gift to the depositors.

Surprisingly, there has been only a minor, if any, affect on rates. It did help Crude and Gasoline prices to a small degree. Shortly after Iran’s ‘gift’ NYMEX crude was priced at 63.76 down -.86 or -1.36%.

More good news, the price on the 10-year Treasury is rising this morning; which is lowering rates, as bond rates and price always move in opposite directions. The rate is 4.634% which is -.030% lower than yesterday’s closing price.

First thing in the morning, bond rates were being pushed lower by the ADP Employment Survey showing private sector job growth of 106.0 in March. Even adding about 20,000 government jobs does not equal the current expectations of 135k to 168k. The ADP Employment Survey is somewhat new, and its ability to predict payrolls has a mixed record today. It does track the payrolls number very well.

At 09:00cdt {14:00gmt} the ISM-Services Index was lower than expected at 52.4. Economists were looking for a 54.7 to 55.0 reading. That surprise has been the primary mover of rates this morning.

Factory Orders were released at the same time as the ISM-Services. It was lower then expectations, which probably added to the bond buying activity. Factory Orders were predicted to be +1.7% to +2.5%. The Department of Commerce reported Factory Orders at +1.0%.

There were items that the bond market ignored but could give insight to future bond activity as well as being interest to the real estate industry. The MBA Purchase Application Index was flat at 402.9 and the 4-week moving average was 409.73. The Challenger Job Report estimated that 48,997 Layoffs occurred in March.

TOMORROW, 05 APRIL 2007.

Thursday has very little economic events. The weekly Initial Jobless Claims are the only item out. It only occasionally surprises the market. It is forecast to be higher than last weeks 308k with analysts anticipating a report of 315k to 318k.

There are other items out, yet they have little history of moving rates. The only two that might move rates is the Bank of England rate announcement and the US Treasury Strips auction announcement. Monster Job Report and Dow Jones Business Barometer have seldom if ever moved rates.

Any one of these five would have to have a big surprise to impact rates. Traders and investors will more likely be taking position, or waiting for the all important Employment Situation Report on Friday.

[Publisher’s note: In an attempt to clean up our blog, we will post all three outlooks on Monday only. We will post an outlook on days when one is modified.]

Steve Boxmeyer [612] 799 – 6858
steve@LendWithIntegrity.com