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The gift that keeps on giving is back.

This morning the 10-Year U.S. Treasury Note yields 2.49%, the lower end of its trading range during the past 12 months. Twice since last July it has peaked near 3 percent, and three times it has bounced from 2.5 percent. Today's print marks a fourth decline.

Traders call this range-bound, and the pattern has mirrored the up-and-down character of U.S. economic indicators. Citigroup summarizes all of the daily data releases in its Citi Economic Surprise Index, an oscillator which rises when data exceed estimates, and falls when data disappoint. As data have disappointed recently, yields have trended lower.

Today's housing data fell significantly short of estimates, dragging the yield below 2.5 percent. This move potentially creates a trading opportunity, especially in light of this week's Humphrey-Hawkins testimony.

Federal Reserve Chair Dr. Janet Yellen made clear to lawmakers yesterday she believes the U.S. economy is gaining strength. In other words, recent data may be misleading. If she's right, bonds should react less to one-month-old figures from the Commerce Department and more to what is effectively her positive forward guidance. Arguably, she's the one in the driver's seat. Yields should rise.

Pimco portfolio manager and Executive Vice-President Tony Crescenzi highlighted the consistency of the 2.5 to 3 percent trading range on Surveillance two weeks ago. Considering Dr. Yellen's comments this week, we're inclined to take action.

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