Market commentary

A lack of confidence hit the global stock markets Monday as investors moved out of riskier assets and sought the safe haven quality of gold and the liquidity of U.S. Treasuries (in spite of the S&P downgrade). So far the response from most U.S. leaders has been to shoot the messenger as opposed to solving the actual problem.

Today the U.S. Treasury begins its refunding by auctioning $32 billion of 3 year notes. As the first auction since the downgrade the demand will give us an indication of confidence, as demand on the last few 3 year auctions has been historically high.

The main event of the day is the Fed meeting, with the markets anxiously awaiting comments from Chairman Bernanke as to what response, if any, the Fed will have to weakening economic growth and recent rout in global stock markets.

As of this writing U.S. stock markets are rebounding from Monday’s steep decline and U.S. Treasuries are moving higher in yield. After closing at 2.31% Monday afternoon the yield on the 10 year note has climbed to 2.385% and prices on mortgages are worse by .25% to .375%.