DAILY MARKET COMMENTARY
Wednesday, June 8, 2011

Federal Reserve Chairman Bernanke affirmed that a “frustratingly slow” US recovery will continue to call for existing monetary stimulus measures, but that economic growth should pick up in the latter half of the year.

In yesterday’s prepared remarks the Chairman stated that “the economy is still producing at levels well below its potential; consequently, accommodative monetary polices are still needed”. Still mindful of the effects of rising commodities prices, he also remarked that the Fed will “take whatever actions are necessary to keep inflation well controlled” and that it appears that the recent uptick in inflation is not broad based and should still prove to be transitory.

As to be expected, employment remains the key issue for the central bank, and the recent rocky performance in initial jobless claims, disappointing non-farm and private payroll gains, and an overall unemployment rate that rose to 9.1 percent all likely factor in as justification for warranting sustained fiscal stimulus. While growth was likely tempered by rising fuel prices and a disruption in supplies from Japan, a decline in consumer confidence and the resulting paring back of spending contributed to the recent slowdown as well. Today’s Beige Book likely won’t provide any positive surprises to offset yesterday’s dismal remarks.

Treasuries yields continue to decline on sour economic news, as the 2-year note dips into the 30’s. Yields as of 10:45 EST are as follows:  2-year note 0.39%; 3-year note 0.70%; 5-year note 1.54%, 10-year note 2.96%, and the 30-year bond 4.22%.

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.- Joshua Becker
Associate Director, Risk Analyst – CU ISI

This information herein was obtained from various sources in which we believe to be reliable. Neither the information presented, nor opinions expressed, constitute an offer to buy or sell any security and are not intended to guide any investor as to what securities to buy or when to buy or sell.