This Week; there are no Treasury auctions this week, back to economic reports that will set the pace. Last week the bond and mortgage markets were generally unchanged with the 10 yr treasury note testing and failing to break the low yield set in early March at 3.14%. Although interest rates are seemingly stuck at the present levels, the outlook remains positive for interest rates staying low as long as the equity markets, the dollar and commodity prices trade soft.
Data this week include Apr housing starts and permits (starts better, permits a little weaker), April existing home sales (a little better), April industrial production and factory use (production a little weaker, factory use slightly better), the key Philly Fed business index (slightly weaker), and weekly jobless claims expected to decline again this week. Crude oil and other key commodities have recently declined with many believing the huge run-up in all commodities has abated. Bernanke and the Fed have repeatedly said of the commodity prices increases that it is "transitory", this week may be the litmus test. We expect most markets to be volatile with prices of interest rates, stocks, and all commodities swinging day to day. If however, crude oil resumes its run higher the bond and mortgage markets will likely struggle and come under some selling pressure.