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What Gives\?

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Goldman Sach's kind words about chip stocks should have had the markets jumping higher, but the major indices are trying to get organized this Monday morning. Perhaps cautious words from Oracle's CFO Jeff Henley that things are not getting better has investors a little hesitant. Falling bond yields are hinting that even Goldman can't make stocks more attractive than bonds right now.

30-Year Treasury Bond Yield Daily Chart

The demand for bonds has been pushing yields lower, and last week was especially tough. Yields were trying to pound out a double bottom, but met resistance at the 200-day moving average. The ensuing sell off pushed bonds down to the psychological 55.50 (5.50%) level, and are once again testing that level today.

5-Year Treasury Yield Daily Chart

46.00 (4.60%) had been the level that 5-year yields were trying to hold, but that support is gone. Now it looks like 44.00 (4.40%) will have to support prices.

The buying in bonds, which pushes yields lower, continues to echo the latest mutual fund data. $3 billion in outflows from equity funds over the past two weeks, and $2.2 billion in inflows for bond funds.

With a slew of economic data coming out this week, it could be a pivotal week for bonds.

Jeffrey Canavan
Assistant Analyst

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