Some Opening Comments June 30 2008

June 30th, 2008 7:15 am | by John Jansen |

Prices of Treasury coupon securities are posting modest losses in overseas trading. The yield on the benchmark 2 year note has climbed 5 basis points to 2.68 percent. The yield on the 5 year note has jumped 4 basis points to 3.38 percent. The yield on the benchmark 10 year note climbed 4 basis point to 4.01 percent. The yield on the Long Bond moved higher by 4 basis points to 4.56 percent.The 2year/10 year spread flattenedby one basis point to 133 basis points.

Equity markets around the globe remain in full throated retreat .European Stocks are down between 1 percent and 2 percent with China and Japan down 0.4 percent and 0.5 percent, respectively. Financial issues continue their slow death spiral and separately surging energy prices weigh heavily o investor sentiment.

Eurozone inflation is rising at a 4.0 percent rate in June, over year ago levels. The preferred level for the hawkish ECB is 2.0 percent. This news will add to the gloom which already permeates the markets and will make more likely a rate hike from the ECB in July. The greenback has decline by more than a full yen and the Euro is flirting with $1.58.

Today is quarter end as well as month end. The month end should prompt some index buying late in the day but I do not believe this to be a month with a significant index extension. If anyone has those numbers or thoughts on that, please be kind and share them on the comments section.

The only noteworthy data in the US today is the Chicago Purchasing Managers survey which should register a small decline.

The Eurozone inflation data has the market reeling. Oil is breaking out to new highs and other commodities are on the run, too. Economic data which will be released over the course of this week should be on the weak side. However, inflation seems to be in the driver’s seat for now and that angst should trump anything except the most dramatic signs of weakness.

With the Treasury market coming off a healthy run to lower yields, I would anticipate a 10 basis point to 15 basis point adjustment to higher yields this week.

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