The bond market was up and down most of the day, but not in any significant amounts.

There was some important data at the opening, and interest rates did respond. But, the response was muted as the market waited for this afternoon’s release of the FOMC meeting; that is fortunate.

The market opened with quarterly Productivity Report and the attached Unit Labor Cost. Productivity is an inverse indicator as far as bonds are concerned. It was forecast at 1.5% to 2.2%. Only one source we watch was the 1.5%. The remainder were looking for a 2.0% to 2.2% reading. The one at 1.5% was closer, as the actual number was 1.8%. Normally, that low finding would cause rates to move upward.

Compounding that was Unit Labor Cost. This important measure of inflation was predicted to be 1.6% to 1.8%. IT was far higher at 2.1%.

Again, it was fortunate that there was the FOMC meeting this afternoon. The 10-year Treasury should have been very bad. Instead it vacillated between +.004% to +.016% from the previous day close.

Shortly after the FOMC statement the rate change chart of the 10-year Treasury looked like an EKG. It closed at +.012% at 4.743%. However it never really moved dramatically either way.

Some news that did not impact rates were the UBS Store Sale Index, and the Redbook Survey. The week to week UBS was -0.3%, while year to year was +3.1%

Consumer Credit was far higher than forecast at $13.2B. The predictions were for $3.5B to $7.0B

Now to the big news; the FOMC Statement and Policy

The FED left its key interest rate alone at 5.25%. That was completely expected. What almost always moves the market is the Policy Statement.

The Statesmen did recognize that the economy is growing a bit weaker. That was a change for the FEDs exclusive focus on inflation. Still, the FED did not hint at future rate cuts.

There is even some speculation that the FED’s unstated bias is toward Higher Interest rates in the future. But that is not as likely as the FED added that "the downside risks to growth have increased somewhat" -- meaning it sees a slightly higher probability of weaker economic growth.

Steve Boxmeyer [612] 799 – 6858

steve@LendWithIntegrity.com