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Treasuries Rallied a Second Day as it Appears the Global Bond Rout is Easing.

Treasuries rallied a second day as it appears the global bond rout is easing.  The dollar extended a fifth weekly slide and oil was up for the ninth consecutive week, the longest weekly advance since 1983.  Gold rose Friday, rising to a 12 week high and capping the biggest weekly gain since January.  Equities were quiet.

Regarding the data, manufacturing data in April disappointed and consumer confidence unexpectedly fell, falling by the most in two years on economic pessimism.

What will occur this week?  An emerging trend is the unexpected occurring.  There is a ton of housing statistics released.  Will the OER component of the inflation indices begin to rebound, a rebound predicated by strength in the housing sector?

Most measure their wealth by the value of their homes, a key input to Owners’ Equivalent Rent (OER).  If the housing data is stronger than expected, I can argue Treasuries could resume their selloff.  Last week Treasuries touched year to date highs.

Speaking of inflation, the CPI is also released as are the Minutes from April’s FOMC meeting.

Markets are fascinating as they represent every variable of life.  The issue at hand is the weighting of these variables, a weighting that can instantly change.

Last night the foreign markets were down.  London was down 0.07%, Paris down 0.76% and Frankfurt down 0.15%.  Japan was up 0.80% and Hang Sang down 0.83%.

The Dow should open quietly lower.  There was little reaction to Chicago Fed bank President Evans’ reiteration of holding rates at zero until 2016.  The news from Greece and Iraq is ugly but no material market  reaction  has yet occurred.  The 10-year is off 2/32 to yield 2.15%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.