Key releases this week were on net, a disappointment, one reason the 10 yr Treasury yield fell from a 3.37% Monday to a 3.30%, Friday.
Of course there are always many factors impacting Treasury prices, including both fiscal and Fed policy, and the occasional flight to quality from folks panicked about one event or another. But the major influence, ongoing, is just plain old real sector developments. Nothing fancy here whatsoever.
For example, Oct/7/2010 the 10 yr was at 2.40%. Nearly everyone looked for dismal economic performance ahead - lousy key releases that is. End of October we advised our clients to look for just the opposite. Sure enough, Dec/8 the10yr printed 3.33%, being a witness to "surprising" vigor. Then the market crowd really got behind the growth mantra, the 10 yr printing 3.53%, Mar/7. About this time we reversed course, warning our clients that there was a piano directly overhead. Yet exuberance continued into early April, the 10 yr printing 3.60% on Apr/8. The trout were still keyed in to the fly long departed. But finally, folks began to catch on. Last print - 3.30%. A interesting little journey.
The equity market went the other way this week, celebrating, but then it’s had a life of its own for some time now.
Key economic data presented nothing to cheer about. Q1 GDP came in under expectations, and key - as we had predicted they would be, those expectations had been shaved substantially from a month earlier. Next, Jobless Claims were up 25M vs market expectations for a decline. Nothing to cheer about there. Both Personal and Disposable Income grew moderately in March. OK, not bad. But Real Consumer Spending was up only 0.2%, not a stick in the eye maybe, but no spark either, suggesting that spending slowed at the end of Q1.
If there’s one primary player which has thrown the ‘ol engine a curve ball, it is oil. We got downright personal with folks several weeks ago and stated that it’s foolish to be constructive (lower prices) on crude. If you are, don’t let your friends know it. Why commit social suicide?
Robert Craven
Of course there are always many factors impacting Treasury prices, including both fiscal and Fed policy, and the occasional flight to quality from folks panicked about one event or another. But the major influence, ongoing, is just plain old real sector developments. Nothing fancy here whatsoever.
For example, Oct/7/2010 the 10 yr was at 2.40%. Nearly everyone looked for dismal economic performance ahead - lousy key releases that is. End of October we advised our clients to look for just the opposite. Sure enough, Dec/8 the10yr printed 3.33%, being a witness to "surprising" vigor. Then the market crowd really got behind the growth mantra, the 10 yr printing 3.53%, Mar/7. About this time we reversed course, warning our clients that there was a piano directly overhead. Yet exuberance continued into early April, the 10 yr printing 3.60% on Apr/8. The trout were still keyed in to the fly long departed. But finally, folks began to catch on. Last print - 3.30%. A interesting little journey.
The equity market went the other way this week, celebrating, but then it’s had a life of its own for some time now.
Key economic data presented nothing to cheer about. Q1 GDP came in under expectations, and key - as we had predicted they would be, those expectations had been shaved substantially from a month earlier. Next, Jobless Claims were up 25M vs market expectations for a decline. Nothing to cheer about there. Both Personal and Disposable Income grew moderately in March. OK, not bad. But Real Consumer Spending was up only 0.2%, not a stick in the eye maybe, but no spark either, suggesting that spending slowed at the end of Q1.
If there’s one primary player which has thrown the ‘ol engine a curve ball, it is oil. We got downright personal with folks several weeks ago and stated that it’s foolish to be constructive (lower prices) on crude. If you are, don’t let your friends know it. Why commit social suicide?
Robert Craven
No comments:
Post a Comment