Market Analysis

Bonds experienced additional pressure yesterday afternoon as investors reacted to released minutes of the last Fed meeting.  The Fed indicates it plans to divest itself of all non-Treasury assets, which includes mortgage-backed securities (MBS).  However, it could take several years to do this. 

In economic news, Initial Jobless claims for the week ended 2/13 were up by 31,000 vs expectations for a 10,000 decrease.  Continuing Claims for the week ended 2/6 were unchanged at 4.563 million (the prior week was revised up from 4.538 million to 4.563 million) vs expectations for a drop in claims to the 4.5 million level.  This news bolstered bonds in early morning trading.  The January Producer Price Index (PPI) showed a higher than expected increase of 1.4% (vs expectations of a .8% increase).  However, the Core Rate (excluding food and energy) was up only 0.3% (against expectations of +0.1%).

Bonds turned negative again though once January's Leading Indicators were released.  Even though at +.3% they were up slightly less than the +0.5% expected, January was the 10th month in a row the Leading Indicators index has shown gains.  The Philadelphia Fed's February business index came in better at 17.6 vs expectations of a 17.0 reading and a 15.2 reading in January.  An index value over zero is considered expansion.