The bond and mortgage markets started slightly weaker this morning but have managed to hold close to unchanged with stock indexes trading a little better. There are no economic reports today. This week Treasury will auction $99B of notes beginning tomorrow through Thursday. With rates now at historic lows the demand will be the measurement of how well the auctions go off. Economic reports this week have Aprilexisting and new home sales, durable goods orders and of course weekly jobless claims.
In Europe the EU summit starts Wednesday. German and French finance chiefs are scheduled to meet in Berlin before the summit meeting. Concern Greece will exit the euro erased about $4 trillion from global stock markets this month. There is a strong desire for keeping Greece in the 17 county currency, although Germany still holds court with its insistence for severe austerity. Greece will have another election in June, in essence to determine whether voters want to stay or go. While the election isn’t framed as a do or die thing, that is what it will be. Hedge funds reduced wagers on a rally in commodities to the lowest this year on mounting speculation that Greece will leave the euro, slowing global growth and curbing demand for everything from copper to soybeans. U.S. stock indexes trading higher on comments from China it would support the economy and German and French officials prepared to meet before a summit. There is an increasing belief that Greece will leave the euro currency, that belief will keep U.S. interest rates from increasing much. According to one report 90% of respondents now believe Greece will go. On Saturday at Camp David G-8 leaders urged Greece to stay within the euro area as polls in the country showed a close race between parties supporting and opposing the European Union’s bailout deal.
Speculation has risen that the Federal Reserve may need to add to the $12.8 trillion already spent to avert a second recession in three years after reports showed jobs are growing more slowly than forecast and Bernanke said April 25th that the Fed “remains prepared to do more as needed.” For first time since it announced Operation Twist in September, the Fed’s preferred gauge of measuring traders’ inflation expectations is poised to fall for a second straight month. Six weeks from now the Fed’s Operation Twist is set to end, with inflation not a factor and the weakening global and U.S. economy there is likely to be increasing speculation the Fed will either extend it or have another plan to keep interest rates from increasing.
At 930am the DJIA opened up +25, NASDAQ up +5. Facebook trade started lower than its IPO price last Friday down -$3.00 from the IPO price of $38.00. The 10-Year Note down -3/32; mortgage prices traded about unchanged from Friday.
