Weekly Preview - Dec. 14, 2009

Last Week; the bond and mortgage markets were choppy, swinging on weak Treasury auctions (the 10 yr and 30 yr). Not much in the way of economic measurements but what there was were better than what had been expected. Retails in Nov were better than markets were looking for, the U. of Michigan consumer sentiment index indicated consumers are increasing their optimism about the economic outlook, and while somewhat ignored in the past couple of years as a positive, the Oct international trade deficit declined for the first time in years. Q4 GDP estimates are being ratcheted higher as the data improves. The rate for the 10 yr note increased by 7 basis points to 3.55%, however mortgage rates remained unchanged last week.
 
This Week; the giant in the china shop is the FOMC meeting that concludes on Wednesday with the short, but critical, statement. With economic improvement slowly but surely improving, markets will be keyed on what if anything it means to the Fed. Bernanke and most Fed officials have been stalwart on letting short term rates remain at zero for most of 2010, or at least until there is complete conviction job markets are stabilizing and some evidence jobs are being created. Although the Fed wants to be sure tightening rates won't lead to a double dip recession, there are a few regional Fed Presidents that are sounding more hawkish on rates. The concern is reacting too late may imbed inflation, and once ignited it becomes more difficult to control. Also this week a number of reports on the condition of the manufacturing sector and Nov housing starts and permits. No data on Monday or Friday.. This is the last week of the year where trading will have a modicum of volume.

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