Last month FED Chairman Ben S. Bernanke and many other policy makers said that they were more concerned about bringing down inflation than about the economy faltering.

Fed fund futures traders have changed their bet to a 24% chance that the FED will lower the FED Funds rate between now and July. On 02 March they had a 76% probability of a rate cut. Bet’s on rate cuts this year increased after the Fed omitted a previous reference to raising borrowing costs in a March 21 statement.

This morning’s Bloomberg on line by Agnes Lovasz and Oliver Biggadike, reported:
“The Fed has made it clear inflation remains its focus and there are no real signs inflation pressures are moderating,'' said John Wraith, head of interest-rate strategy at Royal Bank of Scotland Group Plc. ``We don't see rates going anywhere at all. Therefore, yields are too low. We wouldn't recommend buying any Treasuries at this point.''

The 10-year Treasury is trading at 4.660% which is +.018% from yesterday’s close.

There is little economic data out this morning.

The one item that many readers of this blog should pay attention to, will not give them much comfort. The National Association of Realtors publishes a monthly number called the Pending Home Sales.
An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined and the first of five consecutive record years for existing-home sales. There is a closer relationship between annual changes in the index and actual market performance than with month-to-month comparisons. As the relatively new index matures and seasonal adjustment factors are refined, the month-to-month comparisons will become more meaningful over time.

Pending homes sales Index was at 109.3, which is higher than last month’s revised report of 108.5%. But it is down 8.5% from last years report at this time of 119.4.

From the National Association of Realtors press Release:
“David Lereah, NAR’s chief economist, said there has been a steady narrowing from year-ago readings since last July. “If it wasn’t for the unusually bad weather in February, we’d be seeing a better performance in pending home sales,” he said. “We also may be seeing some fallout from a decline in subprime lending, but a slight improvement in the more volatile month-to-month index is encouraging – the data suggests an underlying stabilization is taking place in the housing market, but it will take another month or two to clarify.”

The UBS Store Sales index was at +0.3% in week-to-week, and +4.9% in year-to-year comparison. Redbook Sales Survey was +4.7%. Both of these weekly numbers have been trending upward, which may be important on 16 April when the next Retail Sales report is out.

TOMORROW, 04 APRIL.

There are two moderately important figures out in the morning at 09:00cdt {14:00gmt}. Wednesday is the release of both ISM-Services Index, and Factory Orders. Both have some chance of surprising the market and therefore impacting rates.

The more important of the two is the ISM-Services Index. It is a forward looking indicator, while Factory Orders are from February. ISM-Services Index is predicted to be 54.7 to 55.0.

Factory Orders may not be as important as ISM-Services, but it has a slightly higher likelihood of impacting rates. Growth in February is anticipated to be reported at +1.7% to 2.5%.

[Publisher’s note: In an attempt to clean up our blog, we will post all three outlooks on Monday only. We will post an outlook on days when one is modified.]

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