Rate Report for today 14 August 2007

The price on bonds opened lower this morning in response to a higher than predicted aggregate PPI. The rate on the 10-year Treasury was +.024% one hour into morning trading, moving the rate to 4.802%.

The rate movement was driven primarily be the Producer Price index (PPI). It was supposed to be +0.1% to +0.5%. The department of Labor posted a +0.6% increase in wholesale costs.

Core-PPI is the more important number; usually. Because it excludes both food and energy it is not as volatile and therefore a better gauge of inflation at the wholesale level. It was predicted to be +.01% to +.02%, and was reported at +.01%.
Because core-PPI was in the range of forecasts it was mostly ignored.

The bond market also ignored the Foreign Trade Balance, also called the International Capital. Most analysts forecast it to be -$61.0B. It was lower at -$58.0B.

The bond market usually ignores both UBS Store Sales and the Redbook Survey. The UBS showed weakness in retail sales. The week-to-week number was -.09% verses the same number last week -0.3%. Year-to-year comparison was +2.3% verses last week’s +3.1%.

The Redbook Survey also demonstrated some weakness from the previous week’s +3.2%. This week’s Redbook was 2.3%.

Bonds reversed themselves in mid-morning as they responded to a sell off in the stock market. Equities are responding to reports from Wal-Mart and Home Depot. Both are DOW components, and both are stating they may see some slowing.

As money moves out of stocks and into bond it brings bond prices higher. When price goes up, rates go down.

The 10-year Treasury is -.032% with the rate at 4.746%. At one point the benchmark bond was -.052% yielding 4.726%.

Yesterday 13 August post close report:

The 10-year Treasury gave up most of the day’s rate increase, closing just +.002% with the rate at 4.778%. Until another explanation, it seems that the benchmark bond trended the same way as the stock market in the afternoon.

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%.

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.

Steve Boxmeyer [612] 799 – 6858

steve@LendWithIntegrity.com