A weaker than expected Durable Goods Orders report is giving Bonds a boost so far this morning. Durable Goods Orders fell by a greater than expected 2.8% during May, as business orders for big ticket items declined. This was the lowest reading since January, and indicates that businesses are making fewer purchases for things like equipment, machinery, and especially for aircraft orders. This weak report was good news for Bonds, as these lower spending levels may help keep inflation moving lower as well.
At 1:00pm ET, the market will be delivered some additional Bond supply by way of a Treasury auction of $13 Billion in Five-year Notes. Added supply always has the potential of having an impact on Bond prices - but even bigger news items are just ahead, with the Fed Policy Statement arriving tomorrow at 2:15pm ET and the important Personal Consumption Expenditure (PCE) number arriving Friday.
Take a look at the Bond chart below to see that Bond prices "gapped open", or opened higher than yesterday's highest trading prices. This is a positive technical signal. But before we start popping the champagne corks, bear in mind that it is a long trading day ahead, and things could change very quickly; the market has been extremely volatile over the past couple of months. For now, we'll advise Cautiously Floating, as we wait to see what the Fed has to say tomorrow on inflation, the economy and the outlook for monetary policy.
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