Market commentary

The decline in the ISM manufacturing report spooked the markets yesterday sending investors into bonds. The 10-year Treasury traded from 2.82% down to 2.72% immediately following the release, eventually closing at 2.74%. This morning the attention of investors is now shifting from wait and watch Washington to concerned about the trajectory of the U.S. economy

Personal spending for the month of June fell 0.2%, its first decline since September 2009. Spending on energy fell 4.5%, contributing heavily to the drop in overall spending. Personal income rose slightly for June coming in up 0.1%.

In addition to the weak U.S. economic data, the “European” fear trade is also carrying over into this morning’s activity. I know, you probably thought this had gone away since the U.S. media has been focusing exclusively on the U.S. deficit/debt ceiling debate for the past week, however, debt yields for Italy, Spain, and Greece have spiked in recent days. Combining weak economic data and the concerns in Europe, there is a flight to quality occurring again and the yield on the 10 year note has dropped to 2.69%. Mortgage prices are better by .25%.