Bonds Fall, Commodities Rise on CPI Report

U.S. Treasuries declined for the first time in a
week as the CPI report showed a greater than expected rise in consumer prices.
Both the CPI and Core CPI (excluding food and energy) came in above consensus
estimates, increasing the likelihood the Fed will have keep interest rates on
hold. Fed Funds futures reflected the new market sentiment as the odds of an
August rate cut fell sharply.

A government auction saw the Treasury raise $18 Bln. today, with another $13 Bln.
scheduled to be sold tomorrow, according to

The Bank of Japan raised interest rates for the first times in seven months,
pushing the yen to a record low versus the euro and a near four year low versus
the dollar.

Crude Oil closed above $60 for the first time since December 29, 2006. Supply
disruptions coupled with cold weather have helped to drive energy prices higher.

Today’s CPI report pushed gold to a nine month high. April gold futures rose
3.5% and March silver futures rose 3.2%. Copper climbed 2.5%.

Commodities as a group posted solid gains with both the Reuters/Jeffries CRB
Index and Goldman Sachs Commodity Index rising.


MBA Purchase
Index: 381.4

Store Sales (W/W Change): -0.1%

Store Sales (Y/Y Change): 3.5%

CPI (M/M Change): Actual 0.2%, Consensus 0.1%

CPI excl. food & energy (M/M Change): Actual 0.3%, Consensus 0.2%

Leading Indicators (M/M change): Actual 0.1%, Consensus 0.3%

John Lee

Associate Editor