US Economy and Credit Markets Week Ended June 22, 2012

Treasuries were lower for the week as the Federal Reserve announced it would extend the Operation Twist program and investors weighed headlines from Europe that were generally more positive. Yields declined on Monday as speculation surrounded the outcome of Greek elections and the market weighed the impact of a pending FOMC meeting and rate decision. Yields rose on Tuesday, despite data from the housing market that came in below expectations, as European officials signaled they would take all necessary action to maintain the European currency union. May Housing starts were 708k vs. a 722k estimate, a 4.8% decline vs. an expected .7% increase, while building permits increased to 780k vs. a 730k expectation. The drop in treasuries continued on Wednesday as the Federal Reserve said it would extend its Operation Twist program and the federal funds rate was left unchanged at .25%. A slew of bad economic data on Thursday caused Treasuries to reverse course and rally sharply. Sales of previously owned homes dropped 1.5% in May to 4.55MM vs. a 4.57MM estimate as the Philly Fed Manufacturing Index slid to -16.6 vs. an estimate of 0. Friday the European Central Bank loosened collateral requirements to ease access to funding and Eurozone leaders agreed to cooperate on a growth plan. This caused a drop in Treasuries that sent yields up to their highs for the week.  Major economic reports (and related consensus forecasts) for next week include: Monday: May New Home Sales (346K, up .9% MoM); Tuesday: June Consumer Confidence (63.5), April S&P/CaseShiller Home Price Index (134.85); Wednesday: May Durable Goods Orders (.5%), May Pending Home Sales MoM and YoY (1.3% and 9.7%, respectively); Thursday: Q1 GDP QoQ (1.9%), Personal Consumption (2.7%); Friday: May Personal Income & Spending (.2% and 0%, respectively), June U. of Michigan Consumer Confidence (74.1).
Posted on Monday, June 25, 2012 @ 9:04 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.