Nov 102014
 

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By G. Steven Bray

Last week’s jobs report showed that the economy continues to plod along, and rates – well, they got better. This counterintuitive result seems due to two factors.

First, markets bid up rates early in the week based on rumors the jobs report would wildly exceed expectations. When it didn’t, traders had to unwind their positions, which caused rates to fall.

Just as likely an explanation is simply market forces at work. Among these forces is bond traders’ focus overseas. European economies still appear to be weakening as does China. When world growth slows, the US will experience some spillover effect, and that helps keep a lid on interest rates.

The only important US economic data this week, not that the market has paid much attention to data lately, is the retail sales report on Fri. Otherwise, absent a new crisis, market forces probably will continue to dominate the direction of rates, which should translate into relatively benign rate movement.

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