Happy Apollo XI Day!! It was on this day 20 July in 1969 that American’s Neil Armstrong, then Buzz Alderin first stepped foot on the face of the moon. It is this blogger’s belief that in 10,000 years; when school children study Western Civilization, and specifically US civilization, that event will be one of the top five achievements.

The price of treasuries took off like the Saturn V Rocket that propelled the astronauts to Lunar Orbit on those Apollo missions. There was no significant data, but the yield, which always trades in the opposite direction as price on the 10-year Treasury opened -.037% lower. The yield continued to move lower all of Friday. At one point in mid-day the yield was down -.087% at 4.941%. The 10-year Treasury closed -.076% with the rate at 4.952%.

There were not data items out. Analysts credited the surge in prices and corresponding rate drop on a few items.

Some mentioned continued concern about the sub-prime mortgage market. This is playing on bonds two ways; both beneficial for rates. In the first place, a collapse or even a contraction of the sub-prime mortgage market will slow the economy. Bad for the economy = good for rates. In the second, money that would have gone to the sub-prime mortgage backed securities now go to treasuries.

SHORT-TERM OUTLOOK [19 July 2007]

A trading range has emerged around the 5.100% level on the 10-year Treasury. The floor is around the psychological 5.000%. The ceiling looks as if it is just above the Fed Funds rate at 5.250%. The recent high occurred on 12 June at 5.297%. The low around 5.040% has been tested on a few occasions, most recently today.

That trading range was tested on 18 July 2007. At one point the 10-year Treasury was at a low of 4.991%. The price on Treasuries gained that Wednesday after Federal Reserve Chairman Ben S. Bernanke predicted in congressional testimony that inflation will recede and said housing market weakness may slow the world's largest economy

The Trading Range was broken on 20 July with the 10-year Treasury closing -.076% with the rate at 4.952%.

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