The Economy and Bond Market Cheat Sheet (May 30, 2011)
U.S. Treasuries rallied this week sending yields lower across the curve by 5 to 10 basis points. Economic news was not particularly encouraging this week and Greek debt concerns captured most of the attention.
Durable goods orders for April fell 3.6 percent, well below estimates and one more indication that global manufacturing is slowing. The negative trend can be seen in the chart below which shows the year over year change in durable goods orders.
Strengths
- Mortgage rates continued to fall, hitting the lowest levels of 2011, at 4.60 percent.
- A gallon of regular gasoline fell to $3.81, down from a peak of $3.99 on May 4.
- German business confidence remained steady in May.
Weaknesses
- Greek default fears escalated this week.
- Housing data remains weak with house prices falling 0.3 percent in March and pending home sales for April dropping a shocking 11.6 percent.
- Initial jobless claims rose to 424,000 this week remaining stubbornly high.
Opportunities
- In an interesting twist, higher oil prices may actually act as a deflationary force if it materially slows the global economic growth.
Threats
- Greek default risks continue to rise as the idea of a “soft restructuring” of Greek debt was floated last week.
