So here is why we should all breath a sigh of relief. Not much of anything happened and that could be a good thing. The importance of the Ten-year Treasury's ability to stay above the 4.00% mark finally ending another down week at 4.04% is worth noting. This is based mostly on the minutes from Thursday's Fed meeting which led many traders to believe that interest rates will continue to go up even as the speculated why.

The commitment to raise rates left the fixed income markets to react in only one way. They backtracked somewhat as the bulls tried to absorb the news. The thinking that got us to this point in time had been based part on speculation and part on economic data which continued to portray a market that was in the midst of a longer soft patch, one that has continued past the second quarter.

The economic data hasn't changed though. So what, even with the slight retrenchment on Friday, does the bond market see that Alan Greenspan doesn't?

That's hard to pinpoint. There has been a growing belief that the fixed income market is being propped up by hedge funds. Some point to recent reports that close to a trillion dollars is being held just offshore, a popular tax haven. Maybe it was the chance that the Fed will look for a historically neutral rate of 3.5% plus as they raise rates methodically into 2005 even if oil slows GDP to 3%.

Or maybe things are not as good as they seem. The combination of the three is the most likely scenario and that has everything at a standstill.

While we are on the subject of history, over the last thirty years, when the Fed began the cycle of raising rates to keep things on an even keel, the yield on the long term bond has fallen at the end of the cycle. With the fed suggesting that with inflation at 2% that they will continue to raise rates, traders are scratching thier heads as the yields do the exact opposite. No one is quite sure what this means. Expect alot of talk about stock market rallies through the end of the year that will help drive those bond prices down. That, although, is not likely.

Or we can buy into the cheerleading and believe the hype that suddenly companies will seriously get down to the business of growth, standing up to troubles in energy, overseas competition, and spending some of the stock piles of cash they are sitting on for things other than stock buybacks.

Or we can hope for nothing and just call it safer than cash for now.