Most of the early morning items opened at, or just below expectations. The rate on the 10-year Treasury was 4.825%, +.021% in first of the morning trading.

The most notable exception was Personal Income. Personal Income was forecast to be a high +0.5% to +0.6%. Instead it matched last month’s +0.4% growth. That should have sent bonds lower, but the low end of the new trading range had already been tested yesterday. Traders needed a bigger surprise to move lower.

Personal Spending was forecast to be a lower +0.1% to +0.2%. It did not surprise and came in at the low end of +0.1%.

A portion of the spending half of this report is the Personal Consumption Expenditure (PCE). This is one of the most important indicators of inflation. Most important, it is the inflation gauge that the FED uses most. It is only forecast by a few analysts, but their guess was for a low 0.1% to 0.2%. It also moved in at the low end at +0.1%.

The quarterly Employment Cost Index is very important to bonds, but did not move them today as it came in at +0.9%, where the majority of predictions where.

Chicago PMI was anticipated to be 58.0 to 59.5. It was released at 08:45 and came in low at 53.4. Bond rates responded momentarily by moving lower. They recovered for only a moment.

Construction Spending gave the big shock to the market contracting by -0.3% instead of the anticipated -0.1% to +0.3%. This gave rates their first reason to move lower.

Consumer Confidence was ignored. Analysts were looking for a 105 to 109 reading, but the Conference Board reported it at 112.6.

The rate on the 10-year Treasury closed at-.033% or at 4.771% for the day.

SHORT-TERM OUTLOOK [26 July 2007]

Wednesday, August 1, 2007

The trading floor may be tested tomorrow.

7:00a.m. MBA Mortgage Refinancing Index. Previous: -1.4%.

7:30a.m. July Challenger Layoffs. Previous: -21.6%.

8:15a.m. Non-Farm Payrolls Forecast. Previous: +132K.

9:00a.m. Tsy Refunding Announcement.

10:00a.m. June Pending Home Sales. Previous: -3.5%.

10:00a.m. July ISM Manufacturing Business Index.. Previous: 56.0.

Thursday, August 2, 2007

8:30a.m. Initial Jobless Claims.. Previous: -2K.

10:00 a.m. DJ-BTMU Business Barometer. Previous: -1.1%.

10:00a.m. June Factory Orders. Previous: -0.5%.

Friday, August 3, 2007

This is a very big day as it contains the Employment Situation Report including

8:30a.m. July Nonfarm Payrolls.. Previous: +132K.

8:30a.m. July Unemployment Rate. Previous: +4.5%.

8:30a.m. July Hourly Earnings.. Previous: +0.3%.

8:30a.m. July Average Workweek.. Previous: +33.9 hours.

10:00a.m. July ISM Non-Manufacturing Business Index.

Steve Boxmeyer [612] 799 – 6858

steve@LendWithIntegrity.com