There will be no review from Moab :)

[Adam in CO]

Volume 12, Number 14 Economic Highlights for the Week Ending April 14, 2006


Monday, April 10th
Strong payroll growth in March increased rate hike expectations last week. Fed fund futures traders are fully pricing in a quarter point rate increase by the Fed when they next meet May 10. That would bring the fed funds target to 5.0%. The chances of another rate raise at the end of June increased to 45% from 30% one week earlier.

Tuesday, April 11th
Long term yields near 5.0% continued to attract buyers in the bond market for a second day, Tuesday. Treasuries suffered under heavy selling last week related to strong economic data that increased rate hike expectations. The Fed is widely expected to raise the target for the fed funds rate to 5.0% at the May 10 meeting and long term yields are expected to hover near there until then. The 10-year note was up 7/32 to 96-22/32 to yield 4.92%.

Wednesday, April 12th
The international trade deficit narrowed in February to $65.7 billion from a record $68.6 billion in January. Exports fell 1.2% while imports dropped a steeper 2.3% accounting for the shrinkage in the deficit. Nevertheless, the trade deficit remains at a high level and is expected to deteriorate further in coming months as domestic demand for imports outpaces foreign consumption of U.S. made products and services.
The government ran a budget deficit of $85.5 billion in March compared to a $71.2 billion deficit in March of last year. Fiscal-year-to-date the budget deficit totals $303.0 billion, slightly deeper than $294.6 billion for the same period one year ago. Calendar effects shifted the timing of some of the government's receipts and outlays which is actually hiding slight improvement in the Treasury budget this year.
The MBA mortgage applications index fell 5.5% to 579.4% for the week that ended April 7. Both purchase and refinance application volume declined last week due to an up-tick in mortgage interest rates.
The U.S. Treasury auctioned $8.0 billion in 10-year TIPS (inflation indexed securities) today with a high yield of 2.409%. Many analysts look at the difference between the 10-year TIPS and the regular 10-year Treasury note to help determine inflation expectations. The current yield on the 10-year note, 4.98% less the 10-year TIPS or 2.409% leaves 2.57%. That roughly represents market expectations for inflation over the next 10 years.

Thursday, April 13th
Retail sales increased 0.6% in March, slightly better than an expected 0.4% gain. Moreover, the huge decline in February was almost cut in half. Motor vehicle sales rose 1.6% last month. Excluding autos, retail sales increased 0.4%. Retail sales results were pretty good considering the late Easter holiday. April sales are expected to be stronger.
Import prices fell 0.4% in March, much lower than estimates for a 0.2% gain. Both petroleum imports and non-petroleum import prices declined last month. Imports are up 4.5% over the past year led by a 22.6% gain in petroleum over the same time frame. Recent oil price gains may drive total import prices up again in coming months.
Jobless claims jumped 12k to 313k for the week that ended April 8. Continuing claims figures are still on the decline. Despite the gain, labor market conditions remain healthy.
Strong economic data that raised the specter of inflation and possibly more Fed rate hikes continued to exert upward pressure on interest rates this week. Yields in the bond market rose and mortgage rates followed suit. 30-year fixed rate mortgages averaged 6.49% this week compared to 6.43% last week according to Freddie Mac's mortgage market survey. Economists at Freddie Mac expect long term mortgage rates to fluctuate somewhere between 6.25% and 6.75% this year.

Friday, April 14th
GOOD FRIDAY
All Markets Closed



Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 11137.65 11120.04 +17.61 or +0.16%
NASDAQ 2326.11 2339.02 -12.91 or -0.55%



WEEK IN ADVANCE
Inflation remains the name of the game and two key price indexes are on the calendar this week. Headline and core producer and consumer prices on Tuesday and Wednesday are expected to show mild gains.
Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate 7.75 6.75 5.75
Fed Discount 5.75 4.75 3.75
Fed Funds 4.88 3.68 2.76
11th District COF 3.604 2.870 2.317
10-Year Note 5.05 4.45 4.37
30-Year Treasury Bond 5.11 4.48 4.37
30-Yr Fixed (FHLMC) 6.49 6.03 5.91
15-Yr Fixed (FHLMC) 6.14 5.62 5.46
1-Yr Adj (FHLMC) 5.61 4.85 4.30
6-Mo Libor (FNMA) 5.1196 4.2154 3.3876
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco




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[CO Hummer]

I'll post one from Moab for you.

[Adam in CO]

I guess I could, but just for you two. It will have to be a PM.

[h2co-pilot]

Maybe you could give us a run down evernight at dinner?

[CO Hummer]

Originally posted by Alec W:
Adam, A quick back rub while we relax in the hot tub sipping on a Martini will work.

You two should get a room.

[Adam in CO]

(sing-song) I'm going down to Moab, gonna drink a lot of beer.

[KenP]

The chances of another rate raise at the end of June increased to 45% from 30% one week earlier.

Oh well. Thanks Adam.