Here's To a New Week

Current trend Direction: Sideways

Advise your Clients:  Locking

Current Price of FNMA 4.0% Bond: $98.47, -6bp

Bond markets are trading near unchanged levels this morning, after economic data revealed that inflation remains tame here in the States.

The Commerce Department reported today the Core Personal Consumption Expenditure (PCE), rose by 0.1% in January, in line with estimates and up only slightly from 0.0% in December.  The Core PCE year-over-year rose by 0.8%, again up just slightly from the previous reading of 0.7%.  The report also showed that Personal Incomes jumped by a pretty juicy 1.0%...but we have to remember that this number is a bit skewed, as a large chunk of the increase came from the reduction in Social Security payments workers get this year as part of the recently passed Tax Package.

If you filled up the tank in your vehicle this weekend, you may have noticed gas prices have crept up in recent days due to the unrest in the Middle East and North Africa - but at least oil has somewhat backed off the highs of last week.  Continued high oil prices would hurt economic recoveries struggling to keep traction all over the world.  

There are no Treasury auctions this week, but POMO marches on…the Fed, through its Permanent Open Market Operations, will purchase of $5B -$7B worth of 2013-2015 maturities.

Chicago PMI was reported at 71.2, which was much better than expectations of 67.5.  And the best reading since July of 1988. 

Looking ahead - the big data point for this week will be the February Jobs Report coming on Friday morning, where it is expected that 180,000 jobs will be created with all gains coming from the private sector.  We will discuss this more later in the week, but we may just see an upside surprise on Friday.

For now, the Bond is trading right at a layer of resistance.  Prices could move higher here as the Middle East uncertainty continues to buoy the Bond market - but the ride will be volatile and short lived if it happens.  Even though inflation numbers aren't showing in our reports as evidenced this morning - inflation is most certainly growing.