Market Update 1-28-11

GDP, our country's gross domestic product, grew 3.2% in the 4^th quarter 2010, a touch below expectations of 3.6%.  Consumer spending gave the number its biggest kick, up 3.0%.  That component had the biggest gain in more than four years.  The Employment Cost Index, another component of GDP, rose .4% which was the second smallest gain on record.  Traders follow that number closely as it has a direct correlation to wage inflation.  The University of Michigan Sentiment Survey was also released, dipping .3 to 74.2.  The current conditions index did the trick, falling nearly 4 points as American's question the need to purchase big ticket items.  Market reaction to all of the above was not good for bonds or stocks in the early going.  Since the open, bonds, notes, and mortgage backs have made a comeback with the 10 year note currently up 9/32's (yield 3.35%) and mortgage backs unchanged (they were off 3 to 4/32's in the early trade).  We priced down 2/32's so you will need a little more juice on MBS trading to get a price improvement.  Stocks are helping our cause, now off over 70 points on the big board.  We like the market today and Monday, based on the add needs in duration for fixed income portfolio's.  After that, all bets are off since the market will be driven by a new month and data ranging from Construction Spending to Big Daddy, the Employment Report for January.  Have a great weekend.
Scott S. Eggen
Senior Vice President - Capital Markets
PrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900
Dallas, Texas 75252

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