Bad news on the housing front has bond prices improving again today. This morning the Commerce Department reported new home sales fell to the lowest level since record keeping began back in 1963. Clearly the expiration of the home buyer tax credit has had a negative affect on purchases, in addition to the continued weakness in the labor market.
This news comes on the second day of the Fed policy meeting, so the markets will be waiting to hear how the Fed addresses the extremely weak housing market as well as the floundering economic recovery.
Prior to the Fed announcement the U.S. Treasury will auction $38 billion of 5 year notes. You will recall Tuesday’s 2 year note auction saw aggressive demand---this morning the yield on the 2 year note stands at .695%.
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