Commentary

Weekly Econotes Fixed Income Report

Econotes

	January 7, 2011	Labor markets continued to improve through year-end, as payrolls grew moderately in December and the unemployment rate fell to a new low for the recovery. The Weekly Leading Index continues to improve.
	December 17, 2010	Economic data continued to improve into the fall. Consumers ramped up spending in November, and manufacturers raised production. Leading indicators have stabilized, and point toward continued economic recovery next year.
	December 3, 2010	Labor markets remained weak in November, but income and consumption continued to rise.
	November 5, 2010	Nonfarm payroll employment increased by more than anticipated in October, and previous months were revised higher. Nonetheless, growth is slow and labor markets remain weak.
	October 29, 2010	Real GDP expanded 2.0% in Q3, up only slightly from 1.7% in Q2. Consumer spending accelerated moderately, but inventory accumulation accounted for 70% of the increase in GDP. Real final sales increased only 0.6%.
	September 24, 2010	It’s official. The recession that started in December 2007 ended in June 2009, according to the Business Cycle dating Committee of the National Bureau of Economic Research.
	September 17, 2010	Retail sales and industrial production moved higher in August, offsetting some of the weakness in the spring. The weekly leading index has also perked up in recent weeks.
	September 3, 2010	Private sector employment continued to grow slowly in August. The unemployment rate edged up to 9.6% in August from 9.5% in July.
	August 27, 2010	Real GDP growth was revised down to 1.6% from the initial estimate of 2.4%. The consensus is still for approximately 2.5% growth in the second half, but recent patterns in some key indicators raise the possibility of a decline.
	August 6, 2010	Private sector employment continued to grow slowly in July, rising by only 71,000 jobs. The unemployment rate stayed at 9.5%, but again only because of an exodus of job seekers.
	July 30, 2010	The economy remains on a path toward slower growth. Real GDP expanded only 2.4% in the second quarter. The increase was the fourth in a row, but left the level of activity still 1.1% below the peak achieved two years earlier.
	July 16, 2010	Economic data have continued to deteriorate. Retail sales fell 0.5% and industrial production in manufacturing was off 0.4%. The ECRI weekly leading index moved deeper into negative territory.
	July 9, 2010	Leading economic indicators point decidedly to an imminent slowdown. Some compelling evidence is consistent with the onset of recession, but we think that conclusion is premature.
	July 2, 2010	Labor markets remained lackluster in June, as private sector employment increased only 83,000. The unemployment rate edged down to 9.5%, reflecting a large exodus from the labor force.
	June 25, 2010	The economy grew more slowly than previously announced in the first quarter. Forecasters continue to expect uninterrupted growth at a rate of approximately 3%, but leading indicators have deteriorated notably.
	May 14, 2010	Industrial production and retail sales advanced in April. Consumer attitudes were little changed.
	May 7, 2010	Hiring has finally overtaken firing, leading to the first substantial net job gains of this economic recovery in March and April. Nonfarm payroll employment increased 290,000 jobs in April following an increase of 230,000 jobs in March.
	April 30, 2010	The economy grew at a 3.2% annual rate in the first quarter, down from the 5.6% pace in the fourth quarter, but the third quarterly gain in a row. Real GDP was 2.5% above the year earlier quarter. Final sales remained anemic.
	April 23, 2010	The Fed is likely to leave its target rate unchanged but alter its statement following the FOMC meeting on April 27-28, opening the door to rate increases later this year.
	April 16, 2010	The latest round of economic releases supports the view that the economy has entered a durable recovery. Leading indicators remain consistent with uninterrupted growth.
	April 9, 2010	The National Bureau of Economic Research met to discuss whether the recession has ended, and decided that the evidence is strong, but premature.
	April 2, 2010	The February employment report is further evidence that labor markets are gaining strength.
	March 26, 2010	The Commerce Department dialed back its calculation of the Q4 growth to 5.6% - still the best since 2003-Q3. Corporate profits surged due to tight cost controls. Leading indicators are consistent with slower real GDP growth in the first half.
	March 12, 2010	Nonfarm payroll employment decreased 36,000 jobs in February, but showed additional signs of stabilizing. The unemployment stayed at 9.7%, suggesting that the surprise decrease in January was not a fluke.
	March 5, 2010	Personal income increased 0.1% in January to 1.1% above the year earlier level – the first positive year-over-year comparison since 2008. Personal consumption expenditures increased 0.5%, due in part to a 0.4% rise in wage and salary disbursements.
	February 26, 2010	The acceleration in real GDP during the fourth quarter survived the first revision, but housing and consumer confidence faltered in January. The Weekly Leading Index weakened again in late February.
	February 19, 2010	Retail sales and industrial production moved higher in January, while leading indicators point to continued growth.
	February 12, 2010	Personal income and consumption edged higher again in December. Consumer attitudes improved modestly again in January, continuing the uneven trend higher since the lows reached in early 2009.
	February 5, 2010	Employment decreased by 20,000 jobs in January. The unemployment rate surprisingly declined to 9.7% from the peak for the cycle of 10.1% in October, further indicating that the recession ended last summer.
	January 29, 2010	Real GDP expanded 5.7% in the fourth quarter, all but ending any debate about whether the recession has ended.
	January 22, 2010	Leading economic indicators continue to build the case that the recession ended and recovery has begun.
	January 15, 2010	Consumer spending and industrial production continued along their rising trends in December. Retail sales were weaker than had been expected. Production increased and extended its winning streak to six months.
	January 8, 2010	Employment decreased by 85,000 jobs in December. The unemployment rate was 10.0% for the second straight month, due to a large exodus of discouraged job seekers from the labor force.
	December 31, 2009	Call Goldilocks. For the first time since 2005, monetary policy is just about right. By our measure, monetary policy is very approximately consistent with normal economic growth and a low and stable rate of change in the general level of prices.
	December 24, 2009	The economy expanded by a revised 2.2% in the third quarter – down from the initial estimate of 2.2%. Forecasters have raised projections for the fourth quarter.
	December 18, 2009	Industrial production stretched its win streak to five months without a decrease. Production reached its trough in past cycles within one month of the end of recession. The recovery signal from leading indicators also strengthened.
	December 4, 2009	The long deterioration in labor markets ended in November, judging by recent trends in employment and unemployment.
	November 13, 2009	Mixed economic reports this week point to an economy that is recovering but remains well below capacity.
	November 6, 2009	Employment fell by 190,000 jobs in October and the unemployment rate increased to 10.2%. The recession is over, and recovery is underway. But the incidence of unemployment is more sever than ever.
	October 30, 2009	Real GDP expanded 3.5% in the third quarter, as expected, led by consumer spending, exports and home building and federal government outlays. Economic stimulus programs added significantly to growth.
	October 16, 2009	No doubt about it. The recession ended a few months ago, judging by the third consecutive monthly increase in industrial production in September.
	October 9, 2009	Auto sales lifted consumer spending in August, but fell flat in September. The slide in industrial activity has stopped, but growth remains uncertain.
	October 2, 2009	Labor markets took one step backward in September after two modest steps forward in July and August.
	September 11, 2009	There is no longer any doubt that the Great Recession of 2007-09 has ended. Of course, the end of recession is merely a turning point. The economy has a very long way to go to recoup the losses of the past year and a half, and it will take a considerable time to complete the task.
	September 4, 2009	Labor markets continued to reel in August from the shock that hit financial markets and the economy last summer and fall. Total employment decreased by 216,000 jobs and the unemployment rate increased by 0.3 percentage points to 9.7%.
	August 21, 2009	The economic news was decidedly upbeat this week, as existing home sales increased, the Philadelphia Fed survey of business conditions improved and leading indicators increased yet again. The Weekly Leading Index is consistenet with much stronger real GDP growth than widely anticipated.
	August 14, 2009	The July increase in industrial production signals the end of recession even as retail sales remain flat. Consumer prices are set to accelerate.
	August 7, 2009	The July employment report was least bad report since just before the financial crisis erupted last September. Labor markets are deteriorating less rapidly than before, but have a long way to go to reach full recovery.
	July 31, 2009	Real GDP decreased at an annual rate of 1.0% in the second quarter, following a 6.4% decrease in the first quarter. The economy has contracted by 3.9% since the beginning of the recession - the largest drop in the post-war period.
	July 24, 2009	Existing home sales were a small bright spot in a light data week. Jobless claims continued to improve, although questions remain about the trend form here. Consumer confidence faded in late July, but seems still on the road to improvement.
	July 17, 2009	Coincident economic indicators continued to deteriorate during June, but leading indicators continued to rebound. The end of the recession is near at hand.
	July 10, 2009	Consumers pared debt further in May and confidence faded in June and early July. Consumption remains weak compared with a year ago.
	July 2, 2009	The June employment report revealed substantial further deterioration in labor markets. Employment fell 467,000 jobs, and the unemployment ticked up to a new cycle high of 9.5%.
	June 26, 2009	Personal income was boosted in May by the American Recovery and Reinvestment Act. Excluding ARRA effects, income growth remained modest. Spending remains sluggish as households raised saving to 6.9% of disposable personal income.
	June 19, 2009	Manufacturing activity continued to deteriorate at a brisk pace in May both in the Midwest and across the country. Capacity utilization in manufacturing fell to a new all-time low.
	June 5, 2009	The deterioration in labor markets slowed somewhat in May, but remained severe. The unemployment rate jumped to a new high for this cycle of 9.4%.
	May 29, 2009	The economy contracted at a somewhat slower, but still rapid, pace of 5.7% in the first quarter. More recent indicators point to a much better second quarter, including the first increase in corporate profits since the second quarter of 2007.
	May 22, 2009	The message of the leading indicators is now clear: the 2007-09 recession will end this summer. The trough most likely will occur in June or July, but the historical range of lead times is consistent with a trough as late as September.
	May 15, 2009	The manufacturing sector contracted again in April, but positive signs continued to accumulate. The Weekly Leading Index continues to rise.
	May 8, 2009	The rate of contraction in the economy slowed in April, and evidence continued to accumulate that the end of the recession is imminent.
	May 1, 2009	The economy contracted sharply again in the first quarter, but signs of recovery continue to accumulate.
	April 24, 2009	How about some good news for a change? Leading economic indicators continue to paint a picture of an imminent trough in the recession. And architects reported very solid improvement in billings and new work inquiries during March.
	April 17, 2009	The first quarter ended on a negative note, with industrial production and retail sales posting large declines. Housing starts and permits also declined, and consumer prices posted the largest the largest year-over-year decline since the mid-1950s.
	April 3, 2009	The deterioration in labor markets continued apace in March. Total employment is down by 5.1 million jobs from its peak in December 2007, and the unemployment rate increased to 8.5%.
	March 27, 2009	Consumer prices increased 0.4% in February for an annualized rate of increase of 4.8%. But core prices (excluding food and energy) rose just 1.8% from a year earlier – about the middle of the range during the past dozen years.
	March 13, 2009	Consumer spending appears to have stabilized early in 2009, even as household wealth suffered a major setback in the fourth quarter.
	March 6, 2009	Labor markets deteriorated again in February. Employment fell by 651,000 jobs and the unemployment rate increased to 8.1%. The continuing shortening of the workweek indicates that recovery is not imminent.
	February 27, 2009	The economy contracted at a faster pace in the fourth quarter of 2008 than initially expected and originally reported. Leading indicators suggest that the rate of decline in activity is near its maximum.
	February 20, 2009	Leading indicators shined a slim ray of hope on a still-dim economic landscape this week. Industrial production and housing starts declined again in January, but the composite leading economic index and the weekly leading index improved a bit.
	February 6, 2009	The accelerated pace of deterioration in labor markets continued in January. Total employment decreased by 598,000 jobs – the largest single-month job loss since December 1974.
	January 30, 2009	The economy contracted in the fourth quarter by the largest amount in any quarter since 1982. If not for an accumulation of presumably unwanted inventories, the decline would have been even greater. The detail in the report points to a steeper drop in the first quarter than was previously anticipated.
	January 23, 2009	Housing construction deteriorated markedly in December from an already severely depressed level. Oddly enough, the news was so negative that it finally is reasonable to expect that investment in residential structures might have stopped subtracting from real GDP growth in the fourth quarter.
	January 16, 2009	The economic picture turned darker in a data-heavy week as retail sales and industrial production both posted substantial declines in December.
	January 9, 2009	The accelerated pace of deterioration in labor markets continued in December. Total employment decreased by 524,000 jobs and the unemployment rate increased to a new cycle high of 7.2%. In rare positive news, the Weekly Leading Index bounced up in the lastest week, lending modest support to the second-half rebound story. Stay tuned.
	January 2, 2009	Manufacturing activity continued to deteriorate at an historical pace as 2008 came to a close. Consumer confidence remained on the ropes.
	December 26, 2008	The 2008 holiday shopping season is shaping up as one of the worst on record. Weak income growth and an increasing propensity to save resulted in a decline in consumer spending for the fifth straight month in November.
	December 19, 2008	Industrial activity turned down again in November after a modest rebound in October from the steep drop in September. Industrial production in manufacturing fell 1.4% to 7.3% below the year earlier level.
	December 12, 2008	Retail sales fell sharply in November, and initial jobless claims spiked to a new high for the cycle. It is far too early to say with confidence, but we could be seeing about the worst of it for leading indicators.
	December 5, 2008	The National Bureau of Economic Research announced that the eleventh post-war recession began in December 2007. Employment posted the largest monthly decline in November since December 1974.
	November 28, 2008	Real GDP growth in the third quarter was revised slightly lower to 0.5%. Higher frequency indicators point toward a sharp drop-off in activity during the fourth quarter that could last at least through the winter.
	November 21, 2008	The stream of negative economic reports continued, and leading indicators of economic activity sank further. The Consumer Price Index fell in October by the largest amount on record dating back to 1947.
	November 14, 2008	Retail sales decreased 2.8% in October – the largest one-month drop on record dating back to 1967. The rate of change in the Weekly Leading Index fell to a new record low of 25.9% during the week ending November 7.
	November 7, 2008	The economy slumped at a remarkable pace in September and October. Job losses accelerated, and the unemployment rate hit a new high for this cycle. The mood among purchasing managers turned deeply negative.
	October 31, 2008	Real GDP fell 0.3% in the third quarter. The decline probably will be revised lower and almost certainly will be followed by a larger decrease in the fourth quarter.
	October 24, 2008	The prices of gold, oil and equities headed lower on the week, reflecting accumulating concerns about a global recession and its implications for corporate profits. Superficial improvement in the Leading Economic Index and existing home sales was largely ignored.
	October 17, 2008	Recession hit with a fury in September. Retail sales and industrial production caved. Housing construction fell again. And the mood of consumers turned down.
	October 10, 2008	In a data-light week, fear filled the void, leading to unprecedented volatility and declines in equity prices. Developments reflected ongoing efforts to arrest the panic that has gripped financial markets for several weeks.
	October 3, 2008	Labor markets deteriorated notably in September and purchasing managers in manufacturing reported one of the sharpest drop-offs in activity on record, leaving no doubt about the seriousness of the ongoing economic downturn.
	September 26, 2008	Leading economic indicators deteriorated in the latest week, but consumer confidence improved and the downward trend in home sales flattened.
	September 5, 2008	The large decrease in employment and rise in the unemployment rate in August confirms the economy is in recession.
	August 29, 2008	Real GDP growth was revised up to 3.3% in the second quarter from the initial report of 1.9%. The upward revision reflected much stronger foreign trade than originally estimated and a smaller decrease in business inventories.
	August 22, 2008	The recent deterioration in leading economic indicators points to more economic weakness ahead.
	August 15, 2008	The July surge in consumer prices marks the end of the recent increase in inflation. Today’s 5.5% inflation rate could be as low as 2.5% by next summer.
	August 8, 2008	Economic news points to a 2% federal funds rate target as far as the eye can see. The deterioration in labor markets appears to have intensified. The special tax rebates have had only a modest effect on real consumer spending so far.
	August 1, 2008	Weak economic growth and falling employment continued through the second quarter and into the third.
	July 25, 2008	The importance of housing for recovery of the economy and financials markets was evident in the reactions to reports on sales of existing and newly built homes in June.
	July 18, 2008	Major monthly economic indicators remained mixed during June, but left intact the impression of an economy struggling from the ongoing adjustments in housing and a further tightening in credit availability and terms.
	July 11, 2008	Far from being inflationary, monetary policy is neutral or even modestly disinflationary. The elevated rate of inflation is the temporary result of high energy prices, and will give way to lower inflation over the next two years.
	July 3, 2008	The June Employment Situation Report removed any doubt about whether the economy is in recession. Private sector payrolls have declined in each of the last seven months – a pattern observed only during recessions in the past.
	June 27, 2008	Tax rebates propped up personal income and consumer spending in May, and housing sales provided a hint that the downturn is slowing. Even so, consumer confidence caved to new long-time lows and equities swooned.
	June 20, 2008	The Fed’s policy-making committee will meet June 24-25. We expect no change in the federal funds rate target. While concerned about faster inflation becoming factored into expectations, policy-makers will no doubt take note of continuing signs of economic weakness.
	June 13, 2008	A promising bounce in May retail sales and solid upward revisions to March and April raised the prospects for second quarter economic growth. The mood among consumers and owners of small businesses remained especially gloomy.
	June 6, 2008	A very bleak employment report for May more than offset modestly positive news from purchasing managers announced earlier in the week. The economy faces more deterioration before it improves.
	May 30, 2008	Real GDP was a little stronger in the first quarter than originally reported, but the mood of consumers darkened notably in May.
	May 23, 2008	The leading economic index was stable for another month, but existing home sales continued to slide. The minutes from the Fed’s April policy making meeting reinforced expectations that the next rate change will be an increase before year end.
	May 16, 2008	Although viewed as better than expected, the economic data released this week were uninspiring. Retail sales were soft and industrial production gapped lower.
	May 9, 2008	The economic picture improved a bit in a data-light week. Yet it is not clear how consumers and businesses will escape the high and rising price of oil and the ongoing tightening of lending standards by banks.
	May 2, 2008	Real GDP grew 0.6% in the first quarter – the same as in the fourth quarter. Most analysts look for a decline in the second quarter. Employment fell for the fourth straight month in April but by a smaller amount.
	April 25, 2008	The GDP Derby is in full swing, and we will have a winner on April 30 when the Commerce Department releases its advance estimate for first quarter economic growth. Analyst estimates range from modestly negative to modestly positive.
	April 18, 2008	Economic data looked a little better this week, and better-than-feared corporate earnings led to increases in equity prices and bond yields. Our recession call still stands, however, owing to the deterioration in key cyclical indicators.
	April 11, 2008	To the extent that expectations matter, the economy is in deep trouble. The outlook of consumers and small business owners deteriorated to critical levels in March and early April, suggesting that economic conditions could worsen before getting better.
	April 4, 2008	Employment fell for the third month in a row in March, indicating that the first business cycle recession since 2001 is almost certainly underway. Manufacturing continued to contract in March, and construction fell again in February.
	March 28, 2008	The economic news in a data-filled week was decidedly negative. Personal income growth continued to falter in February with implications for consumer spending. Consumer confidence fell sharply for the second straight month in March to a long-time low.
	March 21, 2008	Economic news worsened this week, with the latest reports on manufacturing turning negative and the composite leading economic index slipping further into recession territory. The Fed reduced the federal funds rate by 75 basis points to 2.25%, as expected.
	March 14, 2008	Weak February retail sales reinforced already-substantial evidence of slower economic activity. The smaller-than-expected rise in consumer prices during the month tempered concerns about inflation. The Fed is likely to reduce the federal funds rate target by 75 basis points to 2.25% on Tuesday.
	March 7, 2008	There is always room for hope. But the February employment report reduced to an imaginary thread the chance that the economy will avoid recession this year.
	February 29, 2008	Signs of economic weakness mounted further last week. Home sales were weak again in January. Personal income and consumer spending softened in January, and consumer confidence deteriorated in February.
	February 22, 2008	The drumbeat of negative economic reports continued during a relatively light data week. More bad news on housing accompanied an inflation report that generated additional concern. Leading indicators have deteriorated further, and the Philadelphia Fed survey of businesses uncovered deteriorating conditions in the region.
	February 15, 2008	The economy continued to deteriorate this week. Consumer and business confidence fell to recession levels. January retail sales and industrial were both weak.
	February 8, 2008	Will they? Won’t they? How far will they go? Our analysis says that, at 3%, the federal funds target is still above equilibrium. In other words, despite the steep drop in short-term interest rates, monetary policy is still tight. The implication is that this phase of the interest rate cycle has further to go – at least for short-term interest rates.
	February 1, 2008	Economic data leaned back toward the recession path this week. Employment fell in January, marking the first monthly decline since August 2003. Real GDP growth was a below-consensus 0.6% in the fourth quarter.
	January 25, 2008	The Fed finally closed in on the neutral level for the federal funds rate by cutting its target by 75 basis points on Tuesday. It appears likely that the target will be taken below our estimate of neutral in the months ahead.
	January 18, 2008	Talk of economic stimulus is a sideshow, at best. Coincident indictors, such as industrial production and retail sales, continued to falter while leading indicators are slumping badly.
	January 11, 2008	High oil prices led to a sharp one-month deterioration in the trade balance during November. Holiday retail sales posted the weakest year-over-year gain in five years during November-December. The Federal budget benefited from continued strong growth in individual income tax revenues.
	January 4, 2008	The jump in the unemployment rate during December is an unequivocal sign of recession.
	December 31, 2007	Even in the holiday-shortened week, the economic news was bleak. Housing deteriorated further, and jobless claims creeped closer to a critical level.
	December 24, 2007	It’s beginning to look a lot like recession. Despite some more better-than-expected economic reports, the economy continues to edge toward a business cycle downturn.
	December 17, 2007	Expected Fed ease and a disappointing policy statement combined with solid economic reports and a nasty inflation report to unsettle financial markets.
	December 10, 2007	Employment increased by 94,000 jobs in November, matching the six-month average. Manufacturing held steady.
	December 3, 2007	Real GDP growth during the third quarter was revised up to 4.9%. Despite the very strong pace of growth during the last half year, the consensus is for weak growth through at least next spring.
	November 26, 2007	While compelling, the evidence in favor a near-term recession still lacks some key elements. Initial jobless claims need to rise above at least 350,000, the growth rate of ECRI’s short leading index needs to fall further into the red, and the ISM purchasing managers index needs to drop below the neutral level of 50.
	November 19, 2007	Outside of employment, the major economic reports for October have been weak. After payrolls increased 166 thousand in the month, retail sales were soft and industrial production fell.
	November 12, 2007	Economic data were mixed last week, as positive news from purchasing managers at non-manufacturing firms was offset by declines in measures of consumer confidence.
	November 5, 2007	Real GDP grew 3.9% in the third quarter, following 3.8% in the second quarter. Forecasters still expect a slowdown in the current quarter, but employment growth of 166,000 in October indicates that labor markets entered the period with momentum.
	October 29, 2007	Weak housing data and disappointing durable goods orders for September set the tone headed into FOMC meeting on Tuesday and Wednesday. We expect a quarter-point cut in the funds rate.
	October 22, 2007	The deterioration in residential construction activity continued in September and into October. Industrial production weakened in August and September. The Fed’s Beige Book reflected weaker economic activity in late summer.
	October 15, 2007	The tone of economic indicators has improved lately. Strong September retail sales reveal that consumer spending made a major contribution to third quarter economic growth. Jobless claims have improved, but the year-long upward trend in continuing claims bears watching.
	October 8, 2007	Labor markets have weakened this year, but by nowhere near as much as the preliminary August report indicated. The rise in the unemployment rate to 4.7% in September from the low of 4.4% six months ago is a legitimate concern.
	October 1, 2007	Personal income held its ground in August, while spending softened. Housing construction and sales deteriorated. The inventory of unsold homes increased and prices weakened.
	September 24, 2007	The Fed reduced its federal rate target by 50 basis points at its September 18 meeting. The yield curve has steepened about as much since June as it did in the 1995 and 1998 easing episodes. Appreciable additional easing will require pronounced economic weakness and no notable rise in inflation.
	September 17, 2007	In combination with the decrease in employment during August, weak retail sales and industrial production all but guarantee a cut in the federal funds rate target this week.
	September 10, 2007	Employment fell in August for the first time since 2003, sparking concerns about recession.
	September 3, 2007	Real GDP growth was revised up to 4.0% for the second quarter. Consumers have begun to rebuild savings.
	August 27, 2007	Economic data were okay last week, and developments in credit markets dominated the headlines. Durable goods surprised on the upside, as did new home sales. Jobless claims still bear watching.
	August 20, 2007	With market turmoil and Fed drama occupying center stage, economic data were a sideshow. Retail sales and industrial production showed that economic momentum carried into the third quarter.
	August 13, 2007	A light data week provided plenty of excitement. The Fed added liquidity on Friday to facilitate trading. Trends in productivity and labor costs have deteriorated notably since 2003.
	August 6, 2007	The four consecutive monthly increases in the unemployment rate during April-July by a total of 0.25 percentage points is the most serious warning yet for the economic expansion.
	July 30, 2007	Real GDP expanded 3.4% in the second, as expected, up from 0.6% in the first quarter. Growth during 2004-2006 was revised down 0.3 percentage points to 3.2%. Housing deteriorated further in June, clouding prospects for the second half.
	July 23, 2007	The increase in manufacturing production telegraphed by purchasing managers for several months finally occurred in June. Consumer price inflation edged closer to the Fed’s comfort zone. But Fed chairman Bernanke made clear the number one concern is that inflation fails to moderate.
	July 16, 2007	Retail sales decreased 0.9% in June, retracing much of the 1.5% increase the month before. For the quarter, sales increased 5.0% annualized. Consumer sentiment improved notably in early July, possibly due to recent declines in gasoline prices and strong gains in the stock market.
	July 9, 2007	Employment increased by 132,000 jobs in June, and the unemployment rate stayed at 4.5%. Purchasing managers issued upbeat reports, indicating that the economic rebound gained steam in late spring.
	July 2, 2007	Forecasters estimate that second quarter real GDP growth was between -1.5% and +4.0%. They see moderate growth for the remainder of this year and accelerating growth to about the long-run rate next year.

Fixed Income Report

	January 21, 2011	Rates increased marginally on the week despite weakness in equities and falling commodity prices. Next week’s highlight will be the FOMC meeting ending on January 26th.
	January 14, 2011	Rates were little changed on the week as economic news moderated while equities continue to grind higher, closing at 29-month highs. Next week brings earnings reporting season into full swing.
	January 7, 2011	Yet another disappointing employment report put a lid on the Treasury sell-off and caused equity investors to pause despite a positive start to the year for equities. The rally in commodities cooled as the dollar strengthened.
	December 31, 2010	Interest rates ended 2010 lower than where they started the year while equities posted solid gains for the year. 2011 is shaping up as a similar year with rates expected to rise and equities to fare relatively well as the economy continues to recover.
	December 24, 2010	Rates ended a muted holiday-shortened week higher as equities continued to grind out two-year highs and the view of the economy continues to brighten. Next week brings another light week with little expected to happen in the run-up to yearend.
	December 17, 2010	Rates ended the week little changed after hitting 7-month highs on the passage of the Bush-era tax cut extensions and better economic news. The Fed remained committed to its purchase program, as expected, but was relatively subdued on the economy despite the growing consensus for better growth ahead.
	December 10, 2010	Interest rates spiked on the news of an agreement on extending the Bush-era tax cuts adding to a view that the economic picture is improving. Next week the Fed weighs in after its FOMC meeting and is expected to maintain its current quantitative easing program.
	December 3, 2010	A disappointing November jobs report failed to unhinge markets. Equities finished the week with strong gains and long term Treasury rates increased sharply. Recent economic news had run counter to the employment report, leaving markets uncertain about the strength of the economy going into year-end.
	November 26, 2010	Rates ended the holiday-shortened week little changed, but that belied volatility driven by events on the Korean peninsula and sovereign debt worries in Europe while the domestic economic picture brightened heading into the all-important holiday season.
	November 19, 2010	Treasury yields moved to two-month highs as the economy showed signs of improving and markets continued debating the Fed’s stimulus moves. Equities were little changed.
	November 12, 2010	The Fed started its latest round of quantitative easing on Friday and it seemed to trigger a wholesale sell-off in markets that had rallied in anticipation of this day. Chinese efforts to cool its inflation and global condemnation of the Fed’s actions did not help either. Expect more volatility going into year end.
	November 5, 2010	The big news events this week came out near expectations while the monthly jobs report surprised on the positive side for once. The better news on the jobs front will not dissuade the Fed from embarking on its quantitative easing program.
	October 29, 2010	Markets were little changed on the week as next week’s major events loom large. Tuesday’s midterm elections followed by the FOMC press release on Wednesday and Friday’s employment report should make for interesting markets.
	October 22, 2010	Rates were little changed and equities squeaked out another week of gains on positive earnings releases and relatively light economic news. Positioning in front of the mid-term elections and FOMC meeting will likely dominate trading next week.
	October 15, 2010	Interest rates increased as markets appear to have fully priced in expected quantitative easing. Equities rallied despite being dragged down by the banking sector which was hit hard on fears of the growing foreclosure filing controversy.
	October 8, 2010	Another disappointing employment report all but sealed the deal for additional Fed quantitative easing sending rates lower, equities higher, the dollar plunging and gold soaring. The only open question is the extent of the easing and how markets react once it comes most likely at the November meeting.
	October 1, 2010	Rates fell for the third week in a row and the equity rally stumbled as the third quarter came to a close. The dollar weakened further and gold rallied to new highs as markets sort through the ramifications of more quantitative easing expected from the Fed.
	September 24, 2010	The Fed signaled it was open to additional quantitative easing measures, sending Treasury yields plunging. Equities reacted more tentatively but finished strongly on Friday, sending prices through the upper end of the recent trading range.
	September 17, 2010	Treasury yields fell and equities rallied last week as economic numbers presented a mixed bag and sovereign credit worries bubbled yet again. The Fed meets this week with Fed watchers split on what the Fed will announce.
	September 10, 2010	Rates increased and equities drifted higher as market participants reconsidered the chances of a double dip recession. Next week brings a number of economic releases followed by the FOMC the following week.
	September 3, 2010	Long term Treasury rates rose for the second week in a row as economic numbers were slightly better than expected. Equities rallied sharply. Sentiment appears to have turned more positive for the time being.
	August 27, 2010	Interest rates rose this week as traders took profits following Chairman Bernanke’s speech on Friday. Equities ended lower despite rallying Friday. News of the slowing economy appears to be fully priced in. Next week’s jobs report may set the near term trend.
	August 20, 2010	Disappointing jobless claims reinforced fears about the economy, sending rates lower and stocks slumping. Evidence is mounting that the recovery is flagging. The question is what can be done about it.
	August 13, 2010	The Fed spooked markets this week by downgrading its assessment of the economy and took a step toward new stimulus measures. Equities and bond yields fell on worries about a weak economy and the prospects for deflation.
	August 6, 2010	Another disappointing jobs report sent 2-year Treasury yields to historic lows. The Fed meets next week amid debates about whether additional stimulus is needed to jumpstart the weakening recovery.
	July 30, 2010	Renewed concerns about the recovery pushed yields lower. Equities ended flat. On the month equities had a strong performance, retracing some of the prior two months’ decline. Rates ended near recent lows. Market participants are beginning to weigh additional Fed action should the economy slow further.
	July 23, 2010	Equities ended on a positive note after a volatile week as strong earnings reports outweighed uncertainty about European bank stress tests and the economy. Treasury yields were little changed after Chairman Bernanke’s testimony.
	July 16, 2010	Yields fell again this week as worry about the recovery sent equities sharply lower. Chairman Bernanke gives his semiannual testimony to Congress next week and will likely reiterate the pledge to keep rates for an extended period.
	July 9, 2010	Equities recovered sharply this week, sending bond yields higher in spite of a relatively quiet week on the economic data front. Next week brings a full slate of economic news and the beginning of the second quarter earnings release season.
	July 2, 2010	Equities plunged yet again on weak economic news capped by another weak employment report. Treasurys rallied to the lowest yield levels since the 2008 crisis. Market participants are increasingly concerned about a double dip recession.
	June 25, 2010	Equities experienced their worst week in five weeks sending Treasury yields to new lows. The Fed downgraded its assessment of the economy and is likely to stay on hold for some time to come.
	June 18, 2010	Rates were little changed on the week despite a second week of gains for equities. Economic news continued to point to a moderation in the recovery with little inflation. Next week the Fed meets with no significant changes expected.
	June 11, 2010	Financial markets experienced yet another volatile week. Equities plunged then rallied, buffeting bond yields as did economic news, which showed mounting evidence that the economy weakened in May. Markets improved later in the week on news out of China.
	June 4, 2010	Equities were crushed and rates fell sharply as Friday’s employment report disappointed investors and raised the fear that a renewed global slowdown was unfolding.
	May 28, 2010	Markets were volatile again last week, buffeted by news out of Europe and tensions in Asia. Equities were mixed and rates retraced some of the recent decline.
	May 21, 2010	Interest rates plunged as fear swept through global markets prompting a rush to liquidity. Equities reached into correction territory and oil hit 10-month lows.
	May 14, 2010	Markets experienced another volatile week as news of a rescue plan for Greece was first greeted positively then with skepticism. Despite weakness late in the week, equities ended stronger. Treasurys sold off then rallied, finishing at slightly higher yields.
	May 7, 2010	Treasury yields plunged as unprecedented equity volatility spurred by the festering European debt crisis sent shivers through global markets. Investors fear a return of another 2008-style credit crisis.
	April 30, 2010	Treasury yields fell, driven by equity volatility and European sovereign debt fears. The Fed upgraded its assessment of the economy while maintaining that rates would stay low for an “extended period.”
	April 23, 2010	Strong economic news last week sparked renewed confidence in the recovery, sending equities to 19-month highs. Treasury yields increased but remain range-bound. Next week the Fed meets.
	April 16, 2010	Surprising news on Friday that the SEC was charging Goldman Sachs with fraud sent markets spiraling. Equities plunged and rates declined on the news. Separately, the economic news continued to point toward recovery.
	April 9, 2010	Rates declined for the first time in several weeks as concerns about Greece resurfaced and the latest round of Treasury auctions were favorably received. Equities rallied again and the dollar and oil prices were little changed.
	April 2, 2010	Shorter term Treasury yields increased for the fifth week in a row as confidence in the economic recovery mounted, capped by a relatively strong March employment report. Equities hit 18-month highs and oil prices touched 3-month highs.
	March 26, 2010	Treasury yields jumped to 11-week highs as investors balked at the recent slate of auctions. Equities touched 18-month highs and the dollar rallied as confidence mounted about the recovery.
	March 19, 2010	Equities drifted to 18 month highs and Treasury yields were little changed as the Fed left the target rate alone and reiterated that rates would stay low for an extended period.
	March 12, 2010	Rates increased amid stronger equities, better economic news and heavy bond issuance. The Fed meets this week and is not expected to alter rates but the statement will be scrutinized for changes.
	March 5, 2010	A better than expected employment report on Friday buoyed equities and pushed rates higher. Renewed optimism about the economy sent oil prices to seven week highs.
	February 26, 2010	As February drew to a close rates declined on the week but were little changed on the month while equities were slightly lower on the week but finished the month with solid gains. At his semiannual Congressional testimony, Fed Chairman Bernanke reinforced that rates would stay low for the time being.
	February 19, 2010	The Fed surprised markets by increasing the discount rate despite Chairman Bernanke telegraphing the move at his latest Congressional testimony. Treasury yields increased and equities and the dollar rallied.
	February 12, 2010	Global developments continue to roil markets amid signs that the recovery continues. Equities managed to close higher for the first time in five weeks. Treasury yields increased modestly.
	February 5, 2010	A return of risk aversion brought on by fears of European fiscal deficits and renewed global growth fears sparked a sell-off in equities, a stronger dollar and interest rates to move lower.
	January 29, 2010	Despite stronger earnings reports last week, equities remained under pressure. Treasury yields were little changed on the week as the Fed left rates unchanged but upgraded its assessment of the economy. Next week’s jobs report will be watched closely.
	January 22, 2010	President Obama stunned markets by pivoting off the Massachusetts senatorial election defeat to a more populist stance by threatening banks with much stricter regulation. With China continuing efforts to tighten credit, fear and uncertainty have returned to markets. Equities plunged and bonds rallied.
	January 15, 2010	Uncertainty surrounding the economic recovery put a chill in equities and pushed rates lower. Government credit concerns ranging from California to Greece also put a risk-aversion bid in Treasuries. Markets reduced odds of Fed tightening this year.
	January 8, 2010	A disappointing employment report capped the year-end sell-off in Treasuries while only posing a minor problem for equities. Oil prices reached 15 month highs on cold weather and global recovery hopes.
	December 31, 2009	After a late New Year’s Eve sell-off equities ended the week lower while interest rates spiked higher to close the year. Next week brings the return of more active trading and an important employment report.
	December 24, 2009	The much-anticipated Santa Claus rally arrived, pushing equities to 14 month highs. Bonds sold off on growing confidence about the recovery. The dollar rallied and oil rebounded. Continued thin holiday trading is in store next week.
	December 18, 2009	Equities were mixed and Treasuries were little changed as the Fed stayed on message and did not surprise markets. The dollar strengthened and commodities were mixed. Next week brings a holiday-shortened week.
	December 11, 2009	The yield curve steepened as sloppy auctions and good economic news pushed longer term rates higher while short rates were little changed. Equities were mixed, the dollar strengthened and commodities fell. Next week the Fed meets with no expectations of a rate change.
	December 4, 2009	Friday’s release of better than expected November employment situation surprised markets. Treasury rates spiked higher and equities rallied. The dollar jumped and gold prices plunged.
	November 27, 2009	Global markets were spooked by renewed debt crisis fears on news from Dubai. Treasuries benefited from a flight to quality and equities fell sharply, giving back gains from earlier in the week.
	November 20, 2009	Treasury bill yields fell near zero on year-end positioning while equities came under pressure and the dollar strengthened. The holiday season starts in earnest next week with the Thanksgiving holiday. Expect thinning trade and volatility going into year-end.
	November 13, 2009	Interest rates declined modestly as equities rallied for the second week in a row. Gold prices hit new nominal highs and the dollar hit 15 month lows. Oil prices finished lower. As year-end approaches, trading patterns may become less clear.
	November 6, 2009	The yield curve steepened. Short rates fell, aided by the FOMC statement indicating the Fed is in no hurry to raise rates. Longer rates increased as the prospect of continued monetary stimulus spurred inflation fears. The unemployment rate finally broke the 10% threshold.
	October 30, 2009	Rates declined last week as equities came under sharp selling pressure amid concerns about the sustainability of the recovery. The Fed meets next week and is expected to leave rates alone but may change key wording in its press release.
	October 23, 2009	Fixed income investors were spooked by published reports that the Fed was contemplating changing its language to prepare markets for an eventual tightening. Relatively strong earnings releases failed to inspire investors and equities fell.
	October 16, 2009	The Dow Jones Industrials Average broke through the 10,000 level and oil reached new highs for the year. The Treasury yield curve steepened as long rates rose slightly while short rates were little changed.
	October 9, 2009	Treasury yields increased this week as equities reached one year highs and the dollar traded near all-time lows and gold reached nominal all-time highs.
	October 2, 2009	Friday’s employment report capped a week of worse than expected economic news that called into question the strength of the nascent recovery. Equities fell for the second week in a row and bond yields fell to five month lows.
	September 25, 2009	Equities took breather this week as investors’ booked profits coming to the end of another strong quarter. Lower equities and commodities helped push bond prices higher and yields lower. The Fed left rates unchanged as expected and did not give much additional guidance on its exit strategy.
	September 18, 2009	Equities finished near the highs for the year. Treasury yields increased as equities rallied, the dollar weakened and commodities strengthened. The Fed meets next week and is not expected to change rates.
	September 11, 2009	Treasury yields generally fell last week despite rallying equities. Oil prices were volatile and finished higher while gold prices closed the week above $1,000 an ounce for only the second time.
	September 4, 2009	Friday’s release of a mixed employment report capped a week of mixed performance for stocks and bonds. Activity should pick up next week following the Labor Day holiday and provide a clearer picture of the near-term direction.
	August 28, 2009	Treasury yields fell slightly this week after a successful round of auctions. Equities eked out another gain in light summer trading. Markets may experience one more week of low-volume summer trading heading into the Labor Day weekend.
	August 21, 2009	Equities powered to highs for the year as economic news continued to encourage investors. Treasuries were mixed as an early-week rally was snuffed out by rallying equities and rising oil prices.
	August 14, 2009	Treasuries rallied as equities declined for the first time in five weeks on weaker economic news. The Fed, as expected, left rates unchanged but did upgrade its view of the economy while reiterating its expectation that its target rate would stay low for an extended period.
	August 7, 2009	Friday’s release of a better than expected July employment picture sent equities to ten month highs while Treasuries sold off sharply. Consensus is growing that the economy is pulling out of the deepest recession since the Great Depression. Determining the strength of the recovery will be the new guessing game for markets.
	July 31, 2009	Treasury rates were mixed as equities finished their best five month stretch since the Great Depression. Second quarter GDP turned out not as bad as feared. Commodities rallied and the dollar weakened. With recovery in sight, markets may be due for some consolidation.
	July 24, 2009	Equities extended their rally to a second week on positive earnings surprises, reaching levels not seen since last November. Treasury yields increased for the second week in a row, pressured by equities and the specter of more auctions next week.
	July 17, 2009	Equities rallied strongly as earnings results proved better than feared. Given new-found confidence in equities, demand for safe-haven Treasuries waned and rates rose sharply. More earnings news and Chairman Bernanke’s testimony before Congress may spur volatility this coming week.
	July 10, 2009	Treasury yields declined for the fifth straight week. Equities fell as earnings season kicked in and oil prices plunged. Markets are reassessing the optimistic view of the economic recovery.
	July 2, 2009	Treasury yields declined for the fourth week in a row as investors worried the recession was not lessening. June’s employment report reinforced the notion that the bottom may not have been reached.
	June 26, 2009	Treasury yields declined for the third week in a row as market participants reevaluate the strength of the recovery and equities struggle. The Fed left rates unchanged as expected.
	June 19, 2009	Treasury yields moved slightly lower in a relatively quiet week. Equities struggled and finished with losses. Oil prices retreated slightly. The Fed meets next week with no expectations of rate changes but much interest in the accompanying statement.
	June 12, 2009	Treasury yields were little changed on the week after hitting six month highs during the latest round of Treasury auctions. Equities stalled near recent highs. Oil prices reached seven month highs. Traders backed off expectations of imminent Fed tightening.
	June 5, 2009	Rates jumped sharply on Friday in response to a stronger than expected payroll report, reflecting the growing perception that the recession is ebbing. Futures markets now expect the Fed to increase rates before year end, which seems a bit premature.
	May 29, 2009	Longer term Treasury yields spiked to six month highs on supply pressures and rising inflationary fears. Commodities rallied, led by oil and a plunging dollar. Equities finished stronger but have been range-bound over the past four weeks.
	May 22, 2009	Concern that the U.S. sovereign credit rating might be downgraded sent dollar denominated assets – both equities and fixed income – lower. The yield curve steepened sharply. Fears of an imminent U.S. credit downgrade are overblown.
	May 15, 2009	Equities suffered only the second weekly setback in ten weeks as investors reigned in enthusiasm about the bottoming economy. Treasury yields fell and credit spreads generally improved. Credit markets continued moving toward normalcy as even troubled Citigroup sold unsecured bonds without the FDIC’s help.
	May 8, 2009	Treasury yields increased on rallying equities, better than expected economic news and a disappointing bond auction. Following the release of bank stress test results, bank stocks rallied. Markets increasingly are becoming confident the recession has reached a bottom.
	May 1, 2009	Equities finished higher for the seventh out of eight weeks on optimism that the turn in the economy may be at hand. Longer term Treasury yields increased on less risk aversion and increased supply. The Fed left rates unchanged as expected but did not offer to increase its purchases of securities.
	April 24, 2009	Markets were little changed as fears about the banking system linger. The Fed began releasing information about the recently completed bank stress tests with more details expected. The bank stress tests and the resolution of GM and Chrysler will dominate trading near term.
	April 17, 2009	Treasury yields remained locked in a tight range while equities enjoyed a sixth straight week of gains. Economic news remained weak, but generally better than expectations. Credit markets continued to show signs of improvement.
	April 10, 2009	Rates were little changed and equities rallied for the fifth consecutive week as hope continued to build that the economic descent was slowing. Credit markets continue to show signs of stabilizing. Expect rates to remain range-bound.
	April 3, 2009	Rates increased again this week and equities rallied for the fourth week in a row as confidence grew that the economy may be bottoming. Economic news remained weak, but not as bad as feared.
	March 27, 2009	Supply pressures and stronger equities pushed rates higher on the week. A budding optimism took root as economic news was not as bad as expected. Markets are hoping for a bottom.
	March 20, 2009	The Fed surprised markets by announcing it would purchase longer term Treasuries in an effort to supercharge its recovery efforts. Treasury rates plunged and equities rallied on the news. The dollar plummeted and commodities spiked as markets assess the impact of the Fed’s move.
	March 13, 2009	Equities had their best week since November on glimmers of hope from the economy and financials. Treasury yields barely moved despite the rally in equities. The Fed meets next week with little expectation of change in policy.
	March 6, 2009	Bleak economic news culminating in Friday’s dismal jobs report pushed equities to their worst weekly performance of the year and new bear market lows. Treasury yields declined modestly as supply continues to weigh.
	February 27, 2009	Equities declined to new bear market lows. Treasuries were held back by record supply. Markets gave a no confidence vote to the first budget of the Obama administration.
	February 20, 2009	Fears of bank nationalization continued to haunt markets last week, pushing equities near recent lows. Treasuries benefited from a renewed flight to quality bid despite supply pressures. Until markets regain confidence, expect more volatility.
	February 13, 2009	Treasury Secretary Geithner’s bank bailout announcement and likely passage of the stimulus bill failed to cheer markets, resulting in sharply lower equities. Treasury yields declined modestly despite record supply.
	February 6, 2009	Weaker than expected employment news perversely sparked a rally in equities and bond market sell-off as market participants assumed it would force action in Washington on the massive fiscal stimulus bill.
	January 30, 2009	Equities closed out January marking the worst start to on record, while Treasury yields bounced higher on supply fears and disappointment with the Fed’s lackluster support for purchasing Treasuries outright.
	January 23, 2009	Treasury rates increased as supply considerations weighed on the market. Equities continued to suffer led by financials spooked by nationalization worries. The Fed meets this week and is widely expected to leave rates unchanged near zero.
	January 16, 2009	Treasury yields were marginally lower while equities fell sharply on renewed fears about financials. Credit markets, however, continued showing signs of thawing.
	January 9, 2009	Friday’s ugly employment report reinforced the notion that this recession will be one the deepest in the last century. Equities retraced some of the recent gains, and the yield curve steepened.
	January 2, 2009	Continuing a trend started after Christmas, equities rallied sharply on the first trading day in the New Year. Treasury yields were mixed. Trading in the New Year starts in earnest this week.
	December 26, 2008	Markets ended the holiday-shortened week with equities slightly lower and Treasury yields slightly higher. Activity should be light until the turn of the New Year.
	December 19, 2008	The Fed surprised markets at its last meeting. With the fed funds rate now near zero, monetary policy focus will shift to the Fed’s balance sheet. Long term yields fell sharply and equities struggled but ended generally better.
	December 12, 2008	Treasury yields reached historic lows as the auto bailout faltered and recession worries deepened. The Fed will meet this week and lower the fed funds rate again.
	December 5, 2008	Friday’s ugly jobs report capped off a dismal week which started with the official declaration that the recession started in December 2007. Central banks around the world rushed to cut rates. The Fed is likely to follow.
	November 28, 2008	Interest rates hit historic lows as the Fed announced yet another bailout and a new multibillion dollar program to buy assets. Equities rallied sharply on the week as the Obama administration announced its economic team.
	November 21, 2008	Deflation fears sent equities plunging to over 10-year lows while Treasury yields reached historic lows. Oil prices dropped below $50 to 3-year lows. Markets priced to more Fed easing, possibly to zero.
	November 14, 2008	Equities finished the week sharply lower as did oil prices. Treasury yields declined slightly and the yield curve steepened. Money markets conditions showed little additional improvement.
	November 7, 2008	Friday’s bleak news on the employment situation confirmed the U.S. is in the midst of a severe recession. Treasuries rallied as equities came under pressure midweek. Signs of thawing continued in the money markets but normalcy is a way off yet.
	October 31, 2008	The Fed cut rates as expected. Yet, Treasury yields increased as equity markets rebounded strongly to salvage the month from becoming the worst in history. The level of anxiety subsided somewhat, and next week’s election may reduce uncertainty further.
	October 24, 2008	Fears of global recession spurred massive deleveraging and flight from risk which spared few global markets. Given this backdrop, the Fed is expected to cut rates at its meeting this week.
	October 17, 2008	Extreme volatility continued. After enjoying one of the best days, then suffering one of the worst days in history, equities ended the week higher. Money markets showed some signs of thawing, but more is needed. Markets still expect the Fed to lower rates at the end of the month.
	October 10, 2008	World stock markets experienced panic selling as the turmoil in money markets intensified. Central banks responded with coordinated rate cuts, to little avail. Yet Treasury yields increased on the week. Expect volatility amid more government intervention and uncertainty as to what will unfreeze credit markets.
	September 26, 2008	Markets remained in limbo as politicians in Washington continued to wrangle over the details of the bail-out package. Credit markets remained frozen despite the best efforts of central banks to inject liquidity. Expect volatility to continue.
	September 19, 2008	A week of unprecedented events left Wall Street reeling. The federal government proposed drastic measures to try to get ahead of the financial hurricane. Markets recovered by week’s end, but many questions remain.
	September 12, 2008	Turmoil in the financial markets continued as the week began with the government take-over of Fannie and Freddie and ended with rumors of the impending demise of investment bank Lehman. The Fed meets this week and is widely expected to keep rates unchanged.
	September 5, 2008	A weak employment report pushed Treasury yields to five-month lows, but rumors of a government takeover of Fannie and Freddie caused a sharp reversal.
	August 29, 2008	Markets ended the week little changed amid light pre-holiday trading. Activity should pick up this coming week with the release of key monthly economic data. The Fed is expected to stay on hold at least through year end.
	August 22, 2008	Interest rates were little changed as rumors continued to swirl regarding the ultimate fate of Fannie and Freddie. Commodities rebounded somewhat and equities finished lower.
	August 15, 2008	The route in commodities continued this week on worries of a spreading global slowdown. The dollar also strengthened. Treasuries rallied as markets reduced inflation expectations.
	August 8, 2008	Bonds were little changed while equities rallied strongly on falling oil prices and a strengthening dollar. The Fed left rates unchanged, as expected.
	August 1, 2008	Bonds were aided by relatively weak economic news while equities gyrated wildly throughout the week only to end little changed. The Fed meets on Tuesday, and markets expect no change in rates.
	July 25, 2008	Rates ended slightly higher in another volatile week. Falling oil prices brought some confidence to markets, putting pressure on bonds and helping equities. Markets still expect the Fed to increase rates before year end.
	July 18, 2008	Treasury yields finished higher in yet another volatile week. The federal government announced measures to prop up mortgage giants Fannie Mae and Freddie Mac and banks announced better than expected earnings, sending financial stocks and the broader market higher. Oil prices ended sharply lower.
	July 11, 2008	Treasury yields ended an extremely volatile week little changed as rumors swirled about the imminent demise of mortgage giants Freddie Mac and Fannie Mae. Equities swooned further into bear market territory and oil prices set another new high.
	July 3, 2008	Treasury yields dropped to three week lows as equities entered bear market territory and the employment report signaled continued economic weakness. Oil prices continued marching higher.
	June 27, 2008	The Fed left rates unchanged as expected but markets were unhappy with the statement. Equities and the dollar sold off sharply. Commodities rallied with oil hitting another historic high.
	June 20, 2008	Markets slightly dialed back expectations of imminent Fed tightening as bad news from financials spread even into regional banks. The Fed meets this coming week. Markets expect no change to rates but the wording of the statement will be watched carefully.
	June 13, 2008	Treasuries got hammered this week as the Fed joined other central banks in talking tough on inflation. The economy and financial markets have stabilized enough for the central bank jaw-boning to staunch rising inflation expectations.
	June 6, 2008	Friday’s fireworks provided by sky-rocketing oil prices and a sharp increase in the unemployment rate pushed equities sharply lower and bond prices higher. Markets are torn between oil-driven inflation concerns and a weak economy. The Fed is likely on hold for now.
	May 30, 2008	Interest rates rose in May for the second month in a row. Hawkish Fed officials, rising commodities and a more buoyant equity market promoted the premature assumption that the worst is over.
	May 23, 2008	Interest rates finished the week little changed after volatility throughout the week on skyrocketing oil prices and skittish equities. The Fed indicated concern about inflation, and markets took notice.
	May 16, 2008	Interest rates bumped along near the upper end of the trading range as economic releases generally were not as bad as feared and equities found their footing. Markets are now pricing in tighten-ing as the higher probability by year end, which seems a bit premature.
	May 9, 2008	Surging oil prices and more bad news from the financial sector brought back some of the flight to safety bid in Treasuries. Markets reduced expectations of tightening later this year. Steady policy is the most likely course.
	May 2, 2008	The yield curve flattened with short rates rising as the week’s economic news was not as bad as advertized. The Fed delivered a 25 basis point cut on Wednesday as expected. Markets now expect this move to be the last of the cycle.
	April 25, 2008	Stronger equities, increased corporate bond supply and a rising dollar conspired to push interest rates higher this week as the flight-to-quality inspired run in Treasuries reversed itself. Markets now expect the Fed’s 25 basis point move at next week’s meeting to be the last.
	April 18, 2008	Bonds were hammered this week as confidence returned to markets. Equities rallied and bond yields rose sharply. Markets now expect only 25 basis points out of the Fed at the next meeting.
	April 11, 2008	Bad news sprouted anew this week, sending equities lower and fixed income prices higher. Even the Fed admitted that a recession is likely. Markets are priced for a final 50 basis points in Fed rate cuts, which would put the trough for this cycle at 1.75%.
	April 4, 2008	Interest rates ended the week higher as some stability returned to markets. Friday’s release of weak March employment reminded participants that the economy is in recession.
	March 28, 2008	Treasury yields across the maturity spectrum bounced back during the week of March 28, as concerns of imminent financial market meltdown subsided. The Treasury coupon curve steepend slightly and credit spreads widened a bit further.
	March 21, 2008	Volatility in the financial markets continued unabated this week as equities, fixed income and commodities markets were buffeted by the turmoil in the credit markets and the Fed’s unprecedented response.
	March 14, 2008	The turmoil in the credit markets reached a crescendo this week with news on Friday that Bear Stearns required a bail-out from the Fed via J.P. Morgan Chase. Markets now expect up to 100 basis points of easing when the Fed meets on Tuesday.
	March 7, 2008	The February employment report all but confirmed the U.S. economy is in recession. A new round of liquidity concerns sent the Fed scrambling to supply funds to the banking system. Markets expect another aggressive move out of the Fed at the next FOMC meeting on March 18.
	February 29, 2008	Yields fell sharply and equities faltered badly last week as recession fears dominated. Oil prices topped inflation-adjusted highs and the dollar weakened to all-time lows.
	February 22, 2008	Treasury yields ended the holiday-shortened week slightly higher which belied volatility seen during the week. The yield curve gyrated as oil prices broke through $100 and signs of recess-ion mounted, ending slightly flatter in consolidative fashion.
	February 15, 2008	The yield curve steepened again this week as short rates declined while long rates increased. Weak economic numbers point to more Fed easing while longer term market participants fret about the inflationary implication of aggressive Fed action.
	February 8, 2008	Signs of recession mounted. The Treasury yield curve steepened as short rates price to more rate cuts while investors showed little interest for the 30 year bond auction.
	February 1, 2008	Markets had a semblance of normalcy this week even with another 50 basis point easing from the Fed and a weak employment report. Equities steadily improved, rates stabilized somewhat and the yield curve steepened.
	January 25, 2008	The Fed surprised the markets by lowering rates 75 basis points in a rare inter-meeting move. Markets still expect them to move again at next week’s meeting. But questions arose about the Fed’s motivation for easing.
	January 18, 2008	The bad news continued unabated this week, adding to the pain in equities. By week’s end, Washington got involved as President Bush outlined a stimulus package. Rates declined further and the yield curve steepened.
	January 11, 2008	Negative news continued this week pushing equities to nine-month lows and Treasury yields to levels not seen since 2004. The Fed renewed its commitment to counter the crisis with additional cuts.
	January 4, 2008	The New Year started off on a very sour note for financial markets as poor economic news sparked a tailspin in equities and pushed Treasury yields still lower.
	December 31, 2007	Treasuries enjoyed yet another flight to quality burst as negative economic news combined with renewed geopolitical tension to push yields lower. Yields are likely to end the year near their lows as markets grapple with the magnitude of the mortgage-induced slowdown.
	December 24, 2007	More negative news out of the financial sector coupled with light pre-holiday trading caused a volatile week in both equities and fixed income markets. Trading is likely to remain volatile through the holidays.
	December 7, 2007	Slightly better than expected employment news and a modest recovery in equities pushed Treasury yields to their first weekly increase in eight weeks. The Fed meeting on Tuesday will set the tone for markets going into year end.
	November 30, 2007	Markets spent the month of November pricing in a recession as Treasury yields plunged, credit spreads rose and equity prices fell sharply. The Fed seems to have gotten the message.
	November 23, 2007	Yields plunged yet again this week as credit concerns overwhelmed markets and equities collapsed under the weight of the bad news.
	November 16, 2007	Yields continued declining this week as credit markets were spooked by more mortgage related write-downs and worries that the contagion was spreading to the broader economy.
	November 9, 2007	Yields tumbled again this week as ongoing credit concerns spooked equities. The dollar hit historic lows again as foreign investors fear continued turmoil in the U.S. will result in more Fed easing.
	November 2, 2007	Better economic news was overshadowed by new rumors of losses at major brokerage firms this week. The Fed lowered the fed funds rate as expected but did not telegraph further rate cuts.
	October 26, 2007	Treasuries held on to most of recent gains this week despite stronger equities, a weaker dollar and higher commodity prices. The Fed is expected to lower rates next week.
	October 19, 2007	The flight to quality in Treasuries returned with a vengeance this week as housing and credit related problems reared their ugly heads again. Equities collapsed, the dollar hit new lows and oil reached over $90.
	October 12, 2007	The odds of a rate cut at the upcoming FOMC meeting diminished amid growing signs of financial stability and a resilient economy. Equities, gold and oil all traded near recent highs, reinforcing the view that the Fed will take a pass in October.
	October 5, 2007	Friday’s employment report threw a wrench in market expectations for Fed easing as revisions erased the prior month’s job losses. Fixed income markets sold off sharply. A range-trading environment may ensue as markets sort out the lasting impact of this summer’s financial market turmoil.
	September 28, 2007	Treasuries were buffeted by conflicting signals this week. Economic news was mixed while the dollar made new historic lows against the euro and gold prices reached multi-decade highs.
	September 21, 2007	The Fed surprised the markets on Tuesday with an aggressive easing move. Equities and commodities rallied sharply while fixed income markets were mixed and the dollar weakened to new lows against the euro.
	September 14, 2007	Rates increased this week as financial conditions stabilized somewhat. All eyes will be on the Fed this week. Markets expect at least 25 basis points of easing.
	September 7, 2007	Much weaker than expected employment news out on Friday virtually assures an easing by the Fed at its next meeting on September 18. The markets are looking for 50 basis points with more to come before year end.
	August 31, 2007	Treasuries rallied this week as volatility continued in the equity markets and concern about the housing market continued unabated.
	August 24, 2007	The flight to quality in Treasuries subsided somewhat as conditions in the money markets stabilized and equities recovered. The worst may be over for now, but volatility is as close as the next headline detailing hedge fund losses or real estate woes.
	August 17, 2007	In an unexpected move on Friday, the Federal Reserve lowered the discount rate by 50 basis points, admitting that the “downside risks to growth have increased appreciably.” Markets reacted favorably to the news but will likely be looking for more from the Fed.
	August 10, 2007	Treasury rates ended a tumultuous week higher as central banks around the world filled their role as “lender of last resort” and pumped liquidity into the markets to forestall a true liquidity crisis precipitated by growing credit market concerns. The markets are not likely to be satisfied with a temporary injection of liquidity.
	August 3, 2007	Treasuries rallied again this week on continued credit market concerns and equity market weakness. New lows in rates were set on the 2-year Treasury as market participants revisit the likelihood of Fed easing.
	July 27, 2007	The flight-to-quality in Treasuries accelerated last week as a massive repricing of credit risk spilled over into the equity markets which experienced their worst week in five years.
	July 20, 2007	Treasuries rallied this week as investors reassessed their appetite for risk. More rumors circulated regarding the fallout from the subprime debacle, and credit spreads widened amid signs that investors were balking at debt deals to fund private equity transactions.
	July 13, 2007	Treasury rates ended lower in a volatile week as the market wrestled yet again with the potential economic fallout from subprime mortgages. Fed Chairman Bernanke will testify before Congress next week. He is expected to downplay potential fallout from subprime losses and reiterate concern about inflation.
	July 6, 2007	Fixed income markets finished the holiday-shortened week under pressure. Better economic news and the lack of continued flight-to-quality eroded the recent support for Treasuries. The Fed will likely be on hold for some time to come.
	June 29, 2007	Treasuries ended an otherwise difficult quarter on a positive note as the flight to quality bid got a boost from sub-prime mortgage concerns and renewed terrorism risk. The Fed stayed on hold this week, maintaining its focus on inflation.

Commentaries by J. W. Coons Advisors, LLC contain information based on sources that are believed to be reliable, but the accuracy of data and conclusions is not
guaranteed. The views expressed in these reports are subject to change without notice, and are not offers or solicitations with regard to the purchase or sale of securities.

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