Lower Oil Isn't Helping Bonds

Buyers will probably stay near the sidelines. Plus, M&A activity continues.
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The Saudis' promise to boost production has caused oil prices to dip from recent highs, but the bond market has nevertheless opened fractionally lower. Many believe the production hike will do little to alter the inflationary trend of higher costs, and higher prices are beginning to be passed on consumers in various forms beyond prices at the pump.

The bond market will also be preparing to digest some $26 billion in two-year notes this Wednesday. With little economic data due and the likelihood of a

Fed

rate hike coming in June, buyers are most likely to keep close to the sidelines, and dealers might pare to make room for the new supply.

Stocks are still indicating a higher opening; a positive day today would go a long way toward turning some of the oversold signals toward actual buy signals.

While none is earth-shattering, a few deals are being announced this morning:

  • Coinstar (CSTR) - Get Report will buy American Coin Merchandising for $235 million.
  • Lucent (LU) is paying $295 million for privately-held VoIP firm Telica.
  • Forest Oil (FST) will buy Wiser (WZR) .

However, the fact that M&A activity continues at a steady pace shows a certain amount of optimism and confidence in future business conditions and provides a positive undertone for the stock market in general.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Coinstar and Wiser to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He invites you to send your feedback to

steve.smith@thestreet.com.