Bond Expert: Wednesday Outlook

Prices of Treasury coupon securities are registering modest gains in overnight trading as they partially rebound from the sharp losses registered yesterday. The yield on the benchmark 2 year note has declined 3 basis points to 1.83 percent. The yield on the 5 year note has also dropped 3 basis points and rests at 2.67 percent. The yield on the 10 year note has slipped 2 basis points to 3.58 percent and the yield on the 30 year bond has dropped a like amount to 4.42 percent. The yield differential between the 2 year note and the 10 year note has widened one basis point to 175 basis points.

Equity markets around the globe remain mostly ebullient .The Nikkei jumped by over one percent as did the Australian market. The Hang Seng in Hong Kong fell marginally. European markets are generally higher by ½ percent to one percent .Futures markets trading indicates that US stocks will post modest gains at the start of trading here.Intel issued an upbeat assessment of its prospects for the remainder of the year and that has started the animal spirits racing for equity investors.

The US dollar is under attack this morning as it broke to new lows against the Euro. European inflation hit a 16 year high of 3.6 percent in March and that has dashed any hopes that the ECB might weaken it resolve to maintain rates at current levels. Consequently,that diminishes hopes that the rate differential might shift in favor of the US currency.

The US markets brace for some key economic data this morning. Headline CPI is expected to post a gain of 0.3 percent for March and a gain of 0.2 percent at the core level. That would produce a year over year rate of 4.0 percent at the headline level and 2.4 percent at the core level.At that rate the core level would have increased from 2.3 percent in the prior month.

Housing starts and building permits data will show that the sector which has led the economy into recession is still mired deep in its own depression and will not be leading the economy to the promised land anytime soon.