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An interesting set of conditions is developing in bonds:
1) Fundamentally: Housing is weakening, finally... after the artificial
stimulation of the 98 G-7 monetary accomodation....permits and starts are
declining in response to the back-up in rates.... I would expect further
weakness, seasonally adjusted, given that rates have remained relatively high
for the past 30 days.... Sales are also tapering off
2) A weakening construction sector may soften this weeks employment report (A
CRITICAL REPORT for BONDS).
TECHNICALLY:
Commercials are at their HIGHEST net long bond position in over a year, while
the public's sentiment figures are at year-plus lows.
OF ALL OPTIONS, the Fed cannot risk a soft-landing right now.... the U.S.
remains the world's economic engine...If housing is coming down on it's own
in response to market adjustments in rates, the Fed may well decide to take
no action....
IF this weeks employment numbers are modest, then this set of conditions
places us near a low in bonds.
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