YESTERDAY, 24 May 2007

The bond market corrected Thursday’s rate increases in the afternoon. The 10-year Treasury closed flat at -.002% with the yield at 4.855%. Most of the correction was simple bargain shopping.

TODAY 25 May 2007.

The Bond Market will be closing at 13:00cdt {1:00pm, 18:00gmt} in honor of the Memorial Day holiday. A special thank you to all those who have give the ultimate sacrifice so that all of us can remain free.

Rates opened flat with light activity. The first hour and a half into trading the 10-year Treasury was +.006% with the rate at 4.863%.

At 09:00cdt {14:00gmt} the Existing Home Sales Report was released. Economists were expecting a reading of 6.10m to 6.20m. The actual number disappointed all at 5.99m units. That should have moved rates lower, but they barely budged. The 10-year treasury is -.004% with the rate at 4.855%.

Rates should have dropped hard in response to this. It is possible that the sentiment of traders has changed towards higher rates. At the same time, it is possible that today’s light volume hides real sentiment.

SHORT-TERM OUTLOOK [25 May 2007]

Next week will be busy, especially Wednesday Thursday and Friday. The market will be closed on Monday. Tuesday will start out with the Consumer Confidence report.

Wednesday presents us with the FOMC minutes from the last meeting. With most of the last week’s activity centered on FED officials’ comments, the Minutes will garner more attention than usual. The market will move hard one way or the other.

Once the market absorbs the FOMC Minutes it will look toward the GDP and attached Chain Deflator Report on Thursday. Add to that the volatile Chicago PMI Thursday will be busy.

Finally, Friday is the publication of the Employment Report.

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