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Monday, June 21, 2010 7:00 AM
Price Trend: Negative
Price Volatility: Very High
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Current Conditions:
FNMA 4.0 99-31 (-6)
GNMA 4.5 100-09 (-9)
10yr Yield 3.294
Today’s Economic Data (PST)
None
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Commentary:
Bonds are off to a tough start this morning as news out of China over the weekend has boosted stocks.
China announced that they will make gradual adjustments to their currency valuation. This is seen as a
positive for global growth and subsequently helps stocks and hurts bonds.
There is no economic news on the calendar today, but this week is shaping up to be an interesting one.
Housing data, durable goods and GDP will highlight the week’s economic calendar. There is also an FOMC
meeting which culminates with the release of the policy statement on Wednesday. Also, the Treasury will be
auctioning 2, 5 and 7 yr notes this week.

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Wednesday, May 26, 2010 7:00 AM
Price Trend: Negative
Price Volatility: Very High
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Current Conditions:
FNMA 4.0 99-17 (-6)
GNMA 4.5 100-05 (-8)
10yr Yield 3.237
Today’s Economic Data (PST)
Durable Goods 5:30
New Home Sales 7:00
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Commentary:
Bonds are getting hit this morning as stocks continue to rebound after the Dow spent most of yesterday
below 10,000 before rallying back to close above that important level. Durable goods orders appeared to
help stocks although the closely watched “Non-Defense ex-aircraft” number was lower than expected. In
fact, the gains seen in the headline number was almost all attributed to transportation (aircraft) orders. Also
released today was April New Home Sales which posted a larger than expected rise. This number was
clearly impacted by the tax credit and does not likely point to a sustainable expansion in new home sales
going forward. Mortgage apps were up last week but once again the increase was purely refinance activity.
Purchase apps were down for the second week in a row.
Later this morning the Treasury will auction 5 yr notes. Yesterday’s 2yr auction was average at best. All
markets will continue to watch Korea and Europe which appear to be the drivers for the immediate future.

Tuesday, May 11, 2010 7:15 AM
Price Trend: Positive
Price Volatility: Very High
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Current Conditions:
FNMA 4.5 101-13 (+4)
GNMA 4.5 102-04 (+2)
10yr Yield 3.534
Today’s Economic Data (PST)
Wholesale Inventories 7:00
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Commentary:
There is very little happening in terms of economic data today. Wholesale inventories for March were
released and came in a little low. Further review of the data, however, shows that the decrease in
inventories appears to be at the expense of a larger than forecast increase in sales. Once again, this is a
positive sign for the economy. This data is not a big hitter, though, so there has not been a big reaction by
bond prices.
Mortgages continue to outperform Treasuries this morning. Stocks appear to be the main catalyst. The
Dow opened down about 100pts but has since gained back about half of its deficit. Later today Treasury will
auction 3yr notes.
The European situation continues to dominate all markets. The long term effects of the EU bailout plan are
now being considered by investors as they decide where to put their money to work. Today Ben Bernanke
will be briefing the Senate about Europe, but it is not a public affair so there shouldn’t be much bond impact
unless there are leaks about the event.

Last week brought big improvements in mortgage interest rates despite a plethora of bad news. The final piece of unsettling news came Friday afternoon when Barney Frank said his team which oversees Fannie and Freddie would recommend the end of times for the two age old mortgage companies. Mortgage-backed securities continued their rise last week sending mortgage rates which move the opposite down. The benchmark 10 year treasury yield, used to forecast mortgage interest rates dropped significantly last week and today is at 3.62, up 0.23 (+6.78%) on the day. The benchmark yield was below 3.2 when mortgage interest rates dipped to all time record lows. It was announced today existing home sales made the biggest month over month plunge down over 16% in December following the extension of the home buyer tax credit.

Market Outlook

Tuesday, December 01, 2009

Price Trend: Negative

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Current Conditions:

FNMA 4.5 102-14 (-6)

GNMA 4.5 102-20 (-5)

10yr Yield 3.241

Today's Economic Data

ISM Survey 7:00

Construction Spending 7:00

Pending Home Sales 7:00

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Commentary:

Mortgages and Treasuries are down this morning with the former suffering a little more than the latter. The

ISM survey was not consistent with the Chicago PMI that exceeded forecasts yesterday. This did, however,

mark the 4th consecutive month of expansion. Pending Home Sales data was consistent with other housing

data released last week and was clearly impacted by the tax credit expiration (which was extended).

Construction spending was flat in October even and the reported expansion in September was revised to

show contraction. The report was dragged down by commercial construction as homebuilding actually

expanded quite a bit.

The other factor impacting bond prices this morning is the talks regarding how Dubai World will resolve its

debt issues. Treasuries had been benefiting from the speculation that Dubai World would default on $26bln

of debt, but now they are involved in talks to restructure the debt which sapped some of the demand for the

safe haven of Treasuries.

Monday, November 02, 2009 7:20 AM
Price Trend: Negative Price Volatility: High _________________________________________________________________
Current Conditions:
Today’s Economic Data (PST) ISM    7:00
Pending Home Sales    7:00 Construction Spending    7:00
FNMA 4.5 GNMA 4.5 10yr Yield
101-02 (-3) 101-09 (-3) 3.422
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Commentary:
Bonds are down but off their morning lows in a curious reaction to some fairly positive economic data. The ISM survey was definitely the highlight of the morning and the report definitely showed more strength in the manufacturing sector than expected. The headline number came in well above expectations and a look at the details of the report showed higher prices paid and the first positive employment reading in a very long time. Construction spending also beat estimates as did pending home sales. The “normal” reaction to data like this would be for stocks to climb and bonds to fall. Stocks are doing their part with all of the major indices showing gains but bonds have not seen the selling that one would expect.
We have a busy week ahead. The FOMC begins their 2 day meeting tomorrow with the release of their policy statement on Wednesday. ISM Services is also due up Wednesday and the employment report will be released on Friday.