Morning Futures Roundup

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Are Notes Next?
 Fundamentals

T-Note futures are slightly lower this morning ahead of this morning's retail sales report, which is expected to show retail sales for the month of April unchanged from March's figure.  The figure is expected to show a modest increase of 0.2 percent when excluding auto sales.  If the report turns out as expected, it could further boost demand for equities and commodities at the expense of treasuries. 

There has been much guarded optimism of late surrounding the housing and labor markets, which have shown signs of bottoming.  Up to this point, retail sales have not shown an indication that the worst is over.  Spending by the American consumer has helped to lift the global economy out of recession before and there is now hope that consumers may, at the very least, help stabilize conditions. 




There are still pressing issues that could prevent a turnaround, such as relatively tight credit markets and high unemployment, which would reduce the buying power of consumers.  It seems as though the seeds of a bottom have been planted, according to former Fed Chairman Greenspan, but the questions is whether they will grow or shrivel up and die.  The resilience shown by the equity markets of late coupled with reductions in the Fed's buying of treasuries have painted a negative picture for treasuries. 

The actions taken by the government to stabilize the economy will inevitably result in inflation down the road, further lessening the appeal of fixed income products that tend to under-perform in inflationary times.  We have already seen a breakdown in 30-Year Bond prices, suggesting 10-Year T-Notes may follow suit.


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