The week ahead

Short week this week for fixed income traders! The week is relatively calm in terms of economic data except for two things: 1- FOMC minutes on Tuesday and 2- Retail sales on Friday.

The minutes are avidly expected, because everyone will want to know why the Fed cut rates by 50bps and especially how important was the -4k NFP in August in the decision to cut rates. We will remember that the market was expecting a 50bps cut and that is exactly what the Fed did, but it is a bit unclear why they did so. Sure there was continued problems in housing, the liquidity crisis and the poor job report, but was there something else? In any case, some light will be shed Tuesday afternoon!

Retail sales on Friday will also be of interest to take the pulse of the consumers. A slight pick-up is expected after the disapointing September number... Year to date, the numbers have been slightly mixed...

Of secondary interest in the economic arena, we also have 10y tips auctions, consumer sentiment, PPI (let's wait for the CPI), import prices and business inventories.

Looking at the T-bond, the big challenge this week will be to break below the 110-00 level if we want to continue on Friday's venture. Otherwise, to the upside we are still looking at the 112 area.