The market managers ginned up some bogus bad economic news this week and were able to push Treasury yields down. The actual, not seasonally manipulated economic data was much stronger than the Wall Street pundits would have you believe, as I showed in a couple of free articles in the Wall Street Examiner. After the first look where the data was seen as bad, the stories started to surface that things weren’t that bad once the 7 year note auction was put to bed at 1.59%. Such a deal.
There are no big auctions next week. Supply will be very light. However, because the Treasury has no new longer term paper to sell, Wall Street will find an excuse to view the economic data positively and stocks should get the benefit of the light Treasury supply. Meanwhile, yields probably drift back up a bit until the next round of long term paper comes along on April 10-12.
Overall, April will be a light month supply wise, as the Administration holds down outlays and gets the benefit of a big drop in tax refunds while tax receipts held up reasonably well, mostly due to a jump in corporate taxes. Withholding is weak, suggesting a bad jobs report next Friday when the market will be closed. Of course, a weak jobs report will be like ringing the bell for Pavlov’s dogs as traders salivate in anticipation of the next treat from their handler, Ben.
Likewise, holding down outlays, while reducing Treasury supply, will feed into weaker economic data and weaker tax receipts down the line. And as we all know, the weaker the economy gets, the more bullish it is for stocks.
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