Yesterday the bond market slipped again in the face of news that arguably
should have pushed prices higher. In particular, the reports of
weaker-than-expected holiday sales and the Richmond Fed index were both
positive for bonds yet prices weakened from earlier gains.
The slip was yet
another in a string of weak responses to good news dating back to the
consumer price index a week ago Friday. I continue to believe that the
reason for the failures is because the bond market is sensing that the
negative impact from both housing and autos is beginning to wane and that
economic growth will accelerate from current levels.
In the context of the
extreme long positions that exist in the Treasury market relative to the
norm, this sense of a pickup is going against the grain of conventional
wisdom in the bond market.
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Tony Crescenzi Blog Credit Spreads Still Tight 12/26/2006 1:52 PM EST A potential risk for 2007 is widening credit spreads.
Tony Crescenzi Blog Copper Shorts Most Since 2002 12/26/2006 12:32 PM EST It is likely getting closer to its bottom.
Tony Crescenzi Blog Real Estate Loans Flatten 12/26/2006 10:50 AM EST But it is still valid to conclude that there has been an uptick in housing demand of late.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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