Bonds and Stocks have had one wild morning. Had it not been for the continued correction in the equity markets, bond rates would be very high this morning. Instead, bonds opened very lower and have moved up to hover near yesterday’s close. Most of the economic data were indicated a stronger than expected economy. Good for the economy = bad for rates.

The 10-year Treasury was responding to the stock market which was still in some of a sell off after former FED chair Alan Greenspan made some additional negative comments. He did moderate Tuesday’s comments, but the foreign markets reacted negatively. The S&P 500 was as low as 1380.87 in early morning trading which were -23.15 points lower. This moved the 10-year Treasury down to 4.493%, which was -.057% below yesterday’s cost. The stock market did recover in mid-morning trading. The S&P 500 is now at 1403.54, -3.28 points. The 10-year Treasury is now at 4.552% or +.002% over yesterday’s close.

Bonds are clearly not being driven by economic data as we mentioned earlier. If so interest rates would probably be up +.075% to 4.625% on the 10-year Treasury.

The market opened with Personal Income and Spending both higher than expected. Personal Income was guessed to be +0.3% across the board. The guess was lower than January’s report of +0.5%. The Bureau of Economic Analysis of the Department of Commerce reported Personal Income was +1.0%.

Personal Spending was also higher than expected at +0.5%, economists were looking for a +0.4% number. In the case of Personal Spending, both actual and expected were lower than last month’s report of +0.7%.

The only item that could have kept rates lower was the weekly Initial Jobless Claims. It was anticipated 325,000 workers would file for unemployment insurance. 338,000 workers filed last week. This is an inverse indicator meaning more than expected is bad for the economy.

The ‘experts’ have been starting to pay close attention to the manufacturing sector. This mornings 09:00cst {15:00gmt} release of the Institute of Supply Managers Index also surprised the ‘experts’ by coming in higher than expected at 52.3. The ‘experts’ were looking for a number of 49.7 to 50.5; all higher than last month’s 49.3.

In final news, total Construction Spending was +0.5%, while the ‘experts’ were looking for a -0.2% to -0.5%. The only other good item for rates was the Residential Construction Spending sub-report. It was -1.7%, but that was close to predicted.

Commentary: It is fun to listen to the MSM, and especially the left’s media on Air(brain) America. The morning talk-woman Stephanie What’s-her-name was talking about the stock market correction. Of course, she blamed President Bush. She never credited Bush when the stock market has been at ALL TIME HIGHS since September 2006. Stephanie What’s-her-name criticized FOX news for spinning the correction as a market correction. She went on to say how after she watches FOX she switches over to MSNBC or CNN to get the “real news”. She could not believe conservatives were still trying to claim the MSM was liberally biased. Yet she, as a liberal calls them the “real news” and prefers them over what news FOX ‘makes up’.

Stephanie, in 10 years FOX has NOT had to retract a story. Dan Ratherbiased had to resign over made-up documents. Stephanie, CNN called it a correction and blamed overseas markets, the same as FOX. It was the same, who was spinning? CNN did not give any blame when the stock market corrected, and did not credit him when it was at a higher level than at any time during the Clinton Administration. CNN did credit Clinton when the stock market went up in the ‘90s. Who was spinning?

Steve Boxmeyer [612] 799 – 6858
steveb@LendWithIntegrity.com