Market Analysis

Bonds opened up slightly on continued concerns about Greece's debt problems and revived concerns about Italy's debt rating.  However bonds are now flat.  Oil is trading below $93 per barrel.  Stocks opened down slightly but are now up slightly, primarily in response to falling oil prices.  Negotiations are in full throttle in Washington to raise the debt ceiling.  Now is a good time to be very vigilant with floating loan positions as agreements on Greece and the debt ceiling and the possibility that the short term correction in equities and run up in bonds may have run its course could provide for a trend change for interest rates.   Separately, should an agreement to raise the debt ceiling in the US not materialize, this is also viewed as risky for US debt markets and could cause a change in trajectory on rates.  Alternatively though, should European leaders decide that allowing Greece to default is a better solution than trying to band aid the situation, then we would expect to see support for rates at current levels and possibly minor improvement in rates.   The downside risk (of rates moving higher) is greater than the upside potential (or rates moving lower) simply due to how low rates currently are.  There is just not much room for rates to move, particularly given that it is considered not likely that the Fed will intervene with further monetary easing.

This week's economic calendar is very light with Friday's May Durable Goods Orders being the key data release in the US, outside of the standard weekly Jobless Claims data on Thursday.  Durable Goods Orders are expected to have increased 1.5% after a decline of 3.6% in April.  On Tuesday, May Existing Home Sales are expected to have declined to an annualized pace of 4.79 million from an April pace of 5.05 million.

The Federal Reserve Open Market Committee (FOMC) is meeting this week and and on Wedensday Fed Reserve Chair Bernanke will hold another post-meeting press conference.  Analysts currently expect there is little chance of hints of additional monetary easing.