This Week; the FOMC meets on Tuesday. The Fed has been talking about the economy not being as solid as what markets believe and there are a few members that want the FOMC to withdraw its pledge to keep rates low through 2014. There are other members that talk about another easing move with the Fed buying more MBSs and treasuries. The statement at 2:15 on Tuesday should be interesting given the differences od opinions within the FOMC. Treasury will auction $66B of notes and bonds beginning on Monday with $32B of 3 yr notes. Economic data has PPI and CPI, Philly Fed business index (expected to have improved in March), Feb retail sales (+0.7%), and Feb data on manufacturing with industrial production and capacity utilization.
Euro-area finance ministers meet to sign off on the latest Greek bailout and discuss crisis-fighting measures in Spain and Portugal. Greece got its funds to avoid default but based on definition the bailout with bond holders taking huge losses is considered defaulting. The bond market continues to move in a very tight range with no particular direction; interest rates have been little changed since late October, in a 15 to 20 basis point range on the 10 yr note and 6 to 10 basis points on 30 yr mortgage rates. With the fed keeping short rates at zero there is little likelihood the long end (10 yr and mortgages) will increase much. That said, we still hold that rates have seen their lows and any significant move lower is also unlikely as long as the economy is seen as recovering.
TBWS
