Market Analysis

The bond market improved during the day as the US Treasury's 5 Year Note Auction received stronger demand than expected.  The bid/cover ratio was 2.81 which was the strongest since September 2007 when the auction size was only $13 billion (this November's auction was $42 billion).

In economic news, 3rd Qtr GDP was revised down to 2.8% which matched expectations.  The September S&P Case-Shiller Home Price Index showed year over year declines in home prices improving to be down 8.5% which was better than the 9% projected year over year decline. The 3rd Qtr was up 3.1% as we have seen steady improvement in the Home Price Index as the year has progressed.   The November Conference Board Consumer Confidence Index came in at 49.5 vs expected 47.0.  The minutes of Federal Reserve Board’s Nov 3-4 meeting provided some news that could have been interpreted negatively by bond investors.  The Fed projected slightly better unemployment rates in 2010 than previous forecasts.  Also the Fed referenced the decline in the US dollar and indicated they would be watching it should it's drop begin to steepen or should it begin to put significant upward pressure on inflation.