A Cheney-themed bond market commentary yesterday from Mary Ann Hurley

[swag]

http://www.bondsonline.com/Todays_Market/The_Outlook_Today.php

Bonds get blasted with birdshot pellets this morning following a solid retail sales report and concern regarding the upcoming testimony on the economy and monetary policy from Fed Chairman Bernanke tomorrow and Thursday. Thirty-year bonds are down 9/32, yield 4.57%. Ten-year notes are down 6/32, yield 4.60%. Two-year notes are down 1/32, yield 4.68%.

Trigger happy consumer? Retail sales rose 2.3% in January with ex-autos rising 2.2%. Expectations were for a rise of .9% and .8%. The previous month was revised from a gain of .7% to a gain of .4%. Retail sales posted its strongest gain since May ’04. Ex-autos posted its largest gain in six years. While gasoline posted a 5.5% price increase gain, other gains were strong and broad based. Clothing rose 4.2%, motor vehicles/parts rose 2.9%, building materials rose 3.4%, furniture rose 3.7% and general merchandise rose 2.1%. Sales were helped by Christmas gift cards and unseasonable warm weather. The strength in January is most likely overstated while the weakness in December was likely understated.
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Would rather go hunting with Dick Cheney? Ben Bernanke will make his first public appearance as Fed Chairman tomorrow with testimony on the economy and monetary policy to the House Financial Services committee. Testimony will continue on Thursday to the Senate. Market participants will attempt to glean the likely duration of Fed tightening. Bernanke will likely stress the rebound the economy is experiencing following a lackluster fourth quarter. Market participants continue to amplify their viewpoint that the fed funds target will likely reach at least 5.0%. The tenor of Bernanke’s comments will be important.
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DUCK (NO DICK! I mean bend down…not a duck)! German investor confidence fell to 69.8 in February vs. 71.0 the previous month but is holding close to a two year high. The decline in the euro has helped increase exports although at this point, domestic demand remains muted. In order to have sustained growth, domestic demand must emerge. However, given the high level of unemployment rising energy and interest rates and an expected increase coming in the VAT, this is easier said than done.
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The quote worth repeating? “The way to a man's heart is through his chest.” (Aaron Allston) Don’t forget…today is Valentine’s Day.