Rates are lower this morning given most of the inflation and economic data has been good for rates.  The 10-year Treasury moved +.024% higher than yesterday’s close shortly after opening. Shortly after, the rate dropped lower and has remained at that level all morning.  The 10-year Treasury is -.040% with the rate at 5.177%.

Like yesterday, the bond market was initially responding to the headline report of the Consumer Price Index.  The CPI was at the high end of the predicted +0.6% to +0.7%, at 0.7%.  Then, the more important core-CPI was noticed to be below the estimates of +0.2%, with the labor department reporting it at +0.1%.

Traders and investors possibly ignored the higher than forecast NY Empire Index at 25.8.  The market was looking for the NY Fed to report its index at 10.0 to 14.0.  It is possible that the bond rate increase at the open was in response to the Empire Index.

Traders also ignored an increase in the Net Foreign purchases, but it could have helped rates.  Last report it was $67.6B.  It was $84.1B this report. 

The quarterly, Current Account was below the anticipated $199.5B to $203.0B.  The actual number was $192.6B.

About 45 minutes into trading the Industrial Production and Capacity Report was released and gave further push towards lower rates.  Both were below the expected levels.  Analysts were expecting Industrial Production at +0.1% to +0.2%; it was flat at 0.0%.  Capacity Utilization was forecast at 81.5% to 81.5%, it was slightly lower at 51.3%

The market waited for the very volatile preliminary U. of Michigan Consumer Sentiment Survey.  It was predicted to be 87.7 to 89.0.  The U of Mich. published its survey at 83.7.  This give the final downward push on rates.

Steve Boxmeyer [612] 799 – 6858

steve@LendWithIntegrity.com