Market commentary

Inital jobless claims for last week fell 25,000 to 409,000, however, initial claims have come in above 400,000 for six consecutive weeks. This is the historical hurdle rate indicating an expanding or contracting labor market.

The index of leading economic indiacators fell 0.3% in April, the first decline in 10 months. The leading indicators index was depressed by a pickup in jobless claims. Recall that is index is a gauge of where the U.S. economy will be in the next 3 to 6 months.

Wednesday the FOMC released the minutes from their April 26-27 meeting and the biggest news from the minutes was an extensive discussion of exit strategy. The mintues noted that just because they are discussing exit strategies, this does not imply that they are about to begin changing policy stance. The FOMC mostly agreed to a general course of action that would include "ending the cashflow reinvestments of agency-backed holdings, ending reinvestment of Treasury maturities, removing the "extended period" language, raising the overnight target rate, and the selling assets from the portfolio over a five year period".

Bonds sold off Wednesday afternoon as a result of the information released in the FOMC minutes, and in spite of weak economic data this morning, the trend to higher rates continues. The yield on the 10 year note is now at 3.205% and mortgage prices are 25 bps to 30 bps worse than Wednesday.