The Economy and Bond Market Diary (September 13, 2010)
Treasury bond yields moved higher this week as recent economic data has been viewed more favorably as negative economic sentiment may have become overdone. The chart below shows the yield on the 10-year Treasury which is up about 30 basis points just this month.
Strengths
- Initial jobless claims fell to 451,000 which is considerably better than what has been reported in recent weeks.
- The trade balance improved in July as exports climbed while imports dropped. This is incrementally positive for third quarter GDP.
- The Labor Department reported that job openings rose 6.2 percent in June and hit the highest level since April.
Weaknesses
- The Fedâs Beige Book reported âwidespread signs of decelerationâ as the Fed prepares for its Federal Open Market Committee meeting on September 21.
- Home inventories rose for the 8th straight month in August as the housing market continues to struggle.
- Consumer credit fell for the 6th straight month as consumers pare down debt. While this is what needs to take place in the long run, the short term impact is sluggish growth.
Opportunities
- Inflation is unlikely to be a problem for some time and this gives central bankers and other policy makers around the world room for expansive policies.
Threats
- European financial concerns have intensified recently as the long-term solutions still appear elusive for many economies.
