Bond Expert: Wednesday Outlook

 |  Includes: IEF, IEI, SHY, TLT
by: John Jansen

Prices of Treasury coupon securities have registered mixed results in overnight trading. The front end of the yield curve benefited from comments from 0ne Juergen Stark, an apparatchik with the ECB. He noted that the markets properly understood that a rate hike was coming in July but that it would not be part of a series of rate increases. He apparently attended the Arthur Burns school for very fine tuning of interest rates.

So against that background the yield on the benchmark 2-year note has slipped by 6 basis points to 2.86 percent. The yield on the benchmark 5-year note has dropped 4 basis points to 3.52 percent. The yield on the benchmark 10-year note is unchanged at 4.10 percent. The yield on the Long Bond is higher by 2 basis points and rests at 4.72.

Equity markets around the globe are mostly higher this morning. Mainland China is an exception as the highest rate of PPI inflation in several years set back the indices. There is some strength in Japan as the strength in the dollar works to the advantage of the exporters. European stocks have bounced on the interest rate story . US equity futures are positing a modest bounce when trading begins in several hours.

There is a dearth of economic data today. The highlight of the day is the release of the Beige Book by the Federal Reserve. For the uninitiated, the Beige Book is a regularly released chronicle of economic conditions in the various Fed Districts which is prepared ahead of FOMC meetings.

Additionally, there are several Federal Reserve officials speaking today. Jim Bullard, President of the monetarist bastion Saint Louis Fed, as well as vice chairman Donald Kohn will offer comments and potential tape bombs which may upset the market’s less than fragile equanimity.