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Daily Market Commentary

Bonds are drifting higher in quiet trading this morning, looking to take their cues from the housing numbers expected at 10 am.  Combine that with new home sales tomorrow, GDP, PCE and a Fed meeting which concludes on Thursday, and the market should have plenty to chew on this week.


Expect to see soft home sales numbers, as most analysts are expecting.  Continued weakness in the housing market has been a significant contributor to bond market volatility this month, as the subprime shakeout tries to find some footing.  This increases the duration of mortgage backed portfolios and leads to increased selling in an attempt to hedge these portfolios. 


  Housing continues to be the weak link in the economy, so the Fed should have something to say about it coming out of their meeting when they will most likely decide to keep rates unchanged, and continue "eyeing" inflation.


The CAD$ is universally weaker this morning, as the greenback picks up a little steam.  There is very little data out in Canada this week, so the currency will be taking its cues from the commodity markets and south of the border.


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