Market commentary

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%.

Market commentary

Existing home sales in May, which were expected to show and increase actually fell 2.2%, according to the National Association of Realtors. The Federal tax credit which expired April 30, was expected to provide a boost to home sales, and we still may see that in the June data, as purchases must be complete by June 30 to qualify for the tax credit.

Monday’s rally in the stock market faded as the day wore on, and stocks opened flat this morning. Bond prices continue to improve with mortgage bonds better by .125% to .25% in price.

The U.S. Treasury will auction $40 billion of 2 year notes today, and the Federal Reserve begins its two day policy meeting.

Market commentary

With no economic data today the equity and bond markets are being driven by China’s decision to let its currency “float”. The immediate reaction was a rise in value of the Yuan, China’s currency, and a rally in global stock markets. A rise in the value of the Yuan makes goods cheaper inside of China, so in theory, domestic demand will increase. The flip side, however, is that a more valuable Yuan makes exports more expensive, so Chinese goods exported to the U.S. and Europe become more expensive. While this may help U.S. and European manufacturers become more competitive, at the end of the day it makes goods more expensive for U.S. and European consumers.

The rally in the equity markets, as one would expect, has lessened demand for U.S. Treasuries, so we see a decline in bond prices this morning. Mortgage bonds are approximately .25% worse in price from the market close on Friday.

Remember, the U.S. Treasury will auction $40 billion of 2 year notes on Tuesday, $38 billion of 5 year notes on Wednesday and $30 billion of 7 year notes Thursday. In addition to this supply, the Federal Reserve will be meeting to discuss interest rate policy in a two day meeting, which begins Tuesday and will end Wednesday with the Fed announcement regarding interest rates and prognostication for the economy.

Market commentary

No economic data today and both the equity and bond markets are trading relatively flat versus the close on Thursday. The bond market specifically will be focused on next week’s U.S. debt auctions and the Fed meeting.

The U.S. Treasury will auction $40 billion of 2 year notes on Tuesday, $38 billion of 5 year notes on Wednesday and $30 billion of 7 year notes Thursday. In addition to this supply, the Federal Reserve will be meeting to discuss interest rate policy in a two day meeting, which begins Tuesday and will end Wednesday with the Fed announcement regarding interest rates and prognostication for the economy.

Have a great Father’s Day weekend!

Market commentary

More positive news on inflation this morning as the Consumer Price Index for May falling 0.2%, while excluding food and energy CPI rose 0.1%. Additional economic data came from the Federal Reserve Bank of Philadelphia which reported its economic index for its region fell to 8, from a reading of 21.4 the previous month. While a positive number reflects expansion, the drop in the index reflects the expansion is slowing significantly.

Bond prices rose sharply on the tame inflation and weak economic data, with mortgage bonds improving .25% to .375% in price.

Market commentary

Positive news for bonds this morning as inflation remains a non-event based on the Producer Price Index for May falling 0.3%, while excluding food and energy PPI rose 0.2%. Additional positive news for bonds was a report from the Commerce Department that Housing Starts fell 10% and building permits declined to a one year low. This data reflects an overhang of excess housing, including foreclosures and “shadow” inventory, and the expiration of the homebuyer tax credit.

U.S. stock markets are lower on the day given the downbeat economic data on housing while treasury and mortgage bond prices are improved. Mortgage bonds are approximately .125% better from Tuesday’s close. Remember, bonds sold off Tuesday afternoon, so the improvement is from those levels.

Market commentary

European and U.S. stock markets moved higher this morning on successful debt sales by Ireland, Spain and Belgium. Although investors required higher than “normal” yields to absorb the bonds, the markets viewed the auctions as successful.

U.S. Treasuries are flat from Monday’s close while mortgage bonds are improved by approximately .125%.