HAPPY COMMIE DAY
HAPPY BE A RUDE GUEST DAY.

COMMENTARY: It is amazing that people will come and live in a foreign country and attempt to dictate to that country the laws of that country. It is especially shocking when many of those immigrants are not invited!!

TODAY:

Rates are rising this morning as the bond market is focusing on the forward looking manufacturing items and ignoring the housing sector. Rates opened moving lower. Bonds did trade as low as 4.608% which was -.022% from yesterday’s close. That reversed direction as the economic news came out.

The potentially biggest rate mover had little influence this morning. Fed Chair Ben Bernanke was in Montana.  He gave a speech titled; "Embracing the Challenge of Free Trade: Competing and Prospering in a Global Economy". His speech, more theoretical in nature, did not impact rates. Paging through the 10 pages of his prepared speech, it made no mention of rates or the current state of the economy.

That was not true about an hour into the markets opening. The ISM was predicted to be 51.0 to 51.5. It was published at 54.7. That caused rates to change direction and spike upwards.

Bond traders and investors ignored a far lower than forecast Pending Home Sales. Pending Home Sales were also lower than last month’s 109.3. The National Association of Realtors reported its index of sales was 104.3.
There was only one source making any predictions about Pending Home Sales. Therefore, it is very possible that the lower number was as predicted and as such not a surprise. A surprise does not influence rates.

TOMORROW, 02 May 2007

There are some items of low and very low importance out at the markets opening. The weekly MBA Purchase Application Index is a reading of potential changes in the housing market. The monthly ADP Employment Report, and the Challenger Job report are two separate surveys that attempt to paint a picture of the employment situation. The ADP Employment Report will influence rates on a rare basis. Challenger seldom does.

At 09:00cdt {14:00gmt} Factory Orders are released. Last month orders grew at +1.0%. The predictions for next month are for a growth of +1.0% to +2.4%. Only one source is expecting the +1.0% growth. That source is seldom outside of the normal range of thought. It is possible that this hit the wires in error.  Factory Orders do have a history of impacting rates at times.

[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.]

MID-TERM OUTLOOK [1 May 2007]

There may be a few problems for rates for this quarter.

1.) The housing bubble has ‘burst’. The question is, will housing continue to decline? Is it flattening? Or, is it on the verge of a rebound? The data over the last few months has been a resounding maybe to all three. IF homeowners start to see a rebound in housing their confidence will increase. As confidence increases, so will spending. Economic growth is moderate now with problematic inflation. Strong growth could renew strong inflation.

2.) IF investors continue to be concerned with the FED’s ability to fight inflation. The confusion of the last FOMC meeting on 21 March, and the subsequent release of the Minutes on 11 April, caused the bond market to issue a collective HUH?!?! Economists and FED watchers echoed the HUH!?!, and added a wha...?.

3.)In February we wrote:

We have one great inflation fear in the mid-term; corn prices. With all the talk of alternate fuel and ethanol, corn futures have nearly doubled. That will impact not just corn flakes, but pop/soda, beef, and pig, just about anything we eat.

None other than the Western Hemispheres worse dictators agrees with us. (For once

He understands economics.)

An open letter signed by Cuban leader Fidel Castro, titled "More Than 3 Billion People in the World Condemned to Premature Death from Hunger and Thirst," circulated in the media Thursday, 05 April 2007. In his first major statement in months, Castro rejects the use of crops for biofuel production. …he is concerned that President Bush and the US Auto Makers enthusiasm for flexfuel vehicles will have disastrous environmental and food-price consequences for developing countries.

Castro and his ally, Venezuelan President Hugo Chavez, probably are concerned that the Brazilian-U.S. ethanol initiative, launched during Bush's recent Latin American tour, threatens Venezuela's influence in Central American and Caribbean countries through its subsidized oil Petrocaribe initiative.

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