Weekly Market Preview

Last Week; treasuries and mortgages had a good week; the 10 yr yield fell 16 basis points and mortgages down 12 basis points. Most of the week markets focused on the debt issues in the European Union led by the cliff-hanging balancing on Greece's potential sovereign debt defaults. It took weeks and down grades on the Greek debt by S&P but over the weekend the EU and IMF did come up with $146B in funds to dodge the immediate default concerns. Greece had to agree to spending cuts that were quite severe as a requirement for the "loan". Last week's economic data, the few there was, were generally indicative of recovery. Key stock indexes ended the week lower even with better reports from the Chicago manufacturing report covering the mid-west and another decline in unemployment filings. Equities suffered last week on the Greek debt problems. The FOMC meeting concluded with continued comments that the Fed will interest rates low for a lot longer. Treasury sold $118B in 2 yr, 5 yr and 7 yr notes, of the three auction the 7 yr note on Thursday was the strongest as the Fed continues to confirm that inflation is not on the radar.
 
This Week; Treasury borrowing but the economic data will provide economists a lot of ammo to think about. Monday has March personal income and spending and the April ISM manufacturing report. There key data points each day this week, but the big one markets will be setting up for comes on Friday with the March employment report. The early estimates are for non-farm payrolls to have increased about 200K with the unemployment rate unchanged at 9.7%. With the Greek loan worked out over the weekend, the stock market should have a decent day on Monday and the bond and mortgage markets should start weaker as safe haven trades are unwound. Interest rate markets will likely continue in their respective narrow and directionless pattern with not much change by the end of the week. We  do expect some increased volatility early this week based on economic releases and continuing news coming from the EU over the debt problems in Europe; Spain, Portugal and Ireland and Greece are still unresolved in the longer run. The Goldman-Sachs civil suit and now a possible criminal charge will also get attention from investors and traders this week.