Bond Expert: Tuesday Outlook

Prices of treasury coupon securities have registered a very modest rebound from the drubbing which they experienced yesterday.

The mighty greenback is still trembling versus the Euro and has not done much versus the Yen but at this stage it is refraining from establishing new lows.

Equity markets are mixed but the changes thus far recorded are small in each direction.

The yield on the 2 year note has slipped a solitary basis point to 0.91 percent. The yield on the 3 year note has declined 2 basis points to 1.46 percent. The yield on the 5 year note dropped 2 basis points to 2.35 percent. The yield on the 7 year noted edged lower by a basis point to 3.01 percent. The yield on the 30 year bond is unchanged at 4.23 percent.

The 2 year/10 year spread is unchanged at 250 basis points.

The 10 year/30 year spread is a basis point wider at 82 basis points.

The 2 year/5 year/30 year spread starts the trading day at 44 basis points.

There are quite a few pieces of the economic puzzle available for review today.

I believe the most important set of data will be the monthly report on retail sales. The consensus expects total sales will have increased by 1.9 percent and sales ex autos will have climbed 0.4 percent. The main focus of those whose professional career is spent in dissection of such stuff will be the extent to which the “cash for clunkers” program boosted sales.

Economists will want to underscore the extent of consumer demand for non auto related products. The auto rebounded is a government sponsored exercise and is unlikely to be repeated. So it is more important to deconstruct this report to gauge consumer demand in non auto sectors. That might actually give investors some inkling into the psyche of consumers as we head towards the all important)for retaailers) Christmas shopping season.

PPI will also print today and should register an oil induced gain of 0.8 percent. Core PPI should be well behaved at 0.1 percent.

The Empire survey of manufacturing in the New York region should register a gain to 15.0 versus the 12.1 print last month.

The TIPP/IBD measure of economic optimism should show a rise to 51.0 from 50.3.

And business inventories probably declined 0.9 percent after a 1.1 percent decline last month.

The Open Market Desk will intervene in the once free market for Treasuries by making purchases on the 2019 through 2026 sector.

The market’s narrow range has been 3.50 to 3.30 on the 10 year note. One could extend that range 5 basis points in either direction and one would still be close to dead center.

I do not see a compelling trade at this juncture.