MMG Update - Wednesday, May 7, 2008 10:07am ET Current Trend Direction:  Sideways Risks favor:  Floating as long as Bond remains above 50 and 100-day Moving Averages Current Price of FNMA 5.5% Bond: $100.38, +9bp     Last night, Federal Reserve Bank of Kansas City President Thomas "Tommy Boy" Hoenig said inflationary pressures are "troublesome" and if inflation gets too high, the economy could suffer greatly.  He went on to say that if the Fed does move to a tightening bias, the interest rate hikes could be swift.  Although Fed President Hoenig is presently a non-voting member, his comments sure sound as if the current cutting cycle may indeed be at an end.   In this morning's economic headlines, the Preliminary Productivity Index for the 1st Quarter increased by a greater than expected 2.2% annual rate as the "hours worked" component fell by 1.8%, its largest decline in five years...and another sign of a recession.  Unit Labor Costs, a key measure of wage-based inflation, increased by 2.2%, but was below expectations of a 2.6% increase.  Overall, this report was good news for inflation-hating Bonds.   This afternoon at 1:00pm ET, the Treasury will auction $15 Billion in 10-Year T-Notes.  Although we know that our fixed rate sheets are based on Mortgage Backed Securities and NOT the 10-Year T-Note (as the media and your uninformed competitors still seem to believe), this auction could influence the entire Bond market across the board...so we'll be watching this closely later today.  As long as prices can remain above both the 50 and 100-day Moving Averages, we can float, but very carefully.