Rates are somewhat higher in mid-morning trading. The 10-Year Treasury is +.026% with the rate at 4.802%.

Primarily, rates are being the bond market’s fears of credit markets crisis being resolved. In short, the panic is ending, as they always do. Rates are also being driven by Retail Sales numbers to some extant.

Both the Retail Sales and the more important core-Retail Sales numbers were within the forecast numbers. Retail Sales were expected to be +0.2% to +0.4%, and were reported right in the middle at +0.3%. Core-Retail Sales – which exclude both auto and food sales – were predicted to be +0.3% to +0.5%, with most predictors at +0.4%. The majority was correct, core-Retail Sales were +0.4%.

The other major item this morning was the Business Inventories report. It was anticipated at +0.4% across the board, and was reported at exactly that; +0.4%.

If all three of these numbers were as expected, how are they impacting rates? First, we will eliminate the Business Inventories report. It did not affect rates.

Many traders were anticipating a lower than expected number on both Retail Sales and core-Retail Sales. Therefore, they were surprised at an as expected return. There was some good news for Retail Sales in the report. Both aggregate and core numbers had last month’s numbers revised upwards. Last month’s aggregate Retail Sales were revised upward from -0.9% to -0.7%. Core-Retail Sales were also revised upward from -0.4% to -0.2%. That revealed that last month was not as bad as thought.

Fortunately, this was not enough of a boost to cause a major sell-off of bonds.

SHORT-TERM OUTLOOK [26 July 2007]

It looks as if a new trading range has emerged. It appears the ceiling is around 4.900%, maybe a 5.000% flat. The floor seems to be around 4.700%.

Tuesday, August 14, 2007

7:45a.m. ICSC Chain Store Sales Index.

8:30a.m. June Trade Deficit. Expected; $61.0B Previous: $60.04B.

8:30a.m. July Producer Price Index. Expected: +0.1% to +0.5% Previous: -0.2%.

8:30a.m. July PPI, Ex-Food & Energy. Expected: +0.1% to +0.2%. Previous: +0.3%.

8:55a.m.Redbook Retail Sales Index.

5:00p.m. ABC/Wash Post Consumer Conf.

Wednesday, August 15, 2007

8:30a.m. July Consumer Price Index. Expected: +0.1% to +0.2%. Previous: +0.2%.

8:30a.m. July CPI, Ex-Food & Energy. Expected: +0.2%. Previous: +0.2%.

8:30a.m. Aug NY Fed Manufacturing Index. Expected: 15.00 to 19.00. Previous: 26.46.

9:00a.m. June Treasury International Capital Flows. No expectations. Previous: $112.6B.

9:15a.m. July Industrial Production. Expected: +0.2% to +0.4%. Previous: +0.5%.

9:15a.m. July Capacity Utilization. Expected: 81.7 to 81.8. Previous: 81.7%.

3:00p.m. Aug NAHB Housing Market Index. Previous: 24.

Thursday, August 16, 2007

8:30a.m. Initial Jobless Claims. Expected: 310k to 315k Previous 316k

8:30a.m. July Housing Starts. Expected: 1.40 to 1.415. Previous: 1467

8:30am Buildin Permits Expected 1.39 to 1.420. to Previous 1.413 k

10:00a.m. DJ-BTMU Business Barometer.

12:00p.m. Aug Philadelphia Fed Business Index. Expected 8.0 to 10.0 Previous: 9.2.

Friday, August 17, 2007

Mid-Aug Reuters/U Of Mich Sentiment Index. Expected 87.0 to 88.5 Previous: 90.4.

LAST FRIDAY, 10 August.

Prices and rates were little changed on treasuries after US and foreing central banks injected billions of dollars into banking systems for a second day in an effort to boost liquidity and calm fears of a global credit crunch.

The US’s own Federal Reserve on Friday injected a total of $38 billion into the markets in three steps.

The 10-year Treasury closed at 4.776% on Friday.

Steve Boxmeyer [612] 799 – 6858

steve@LendWithIntegrity.com