Tough Time for Bonds

Bloomberg reports even with the Fed Funds rate at 2%, municipal borrowers are still having difficult time raising money. The Bay Area Toll Authority in Oakland, which runs bridges across the San Francisco Bay, recently sold more than $700 million of bonds at rates as high as 5.34%.

At this time last year the same debt cost 4% when the target rate was at 5.25%. Bond prices have fallen an annualized 4.75% this year according to Merrill Lynch’s Municipal Master Index. It is the most since 1999 where prices dropped 11.3%. For more on the overall economy, see Todd’s The Recovery and the Storm.

From the Bull Pen: Can the equity markets sustain this rally? Those bullish can play the KBW Bank ETF (KBE); sell-stops can be set in the $32-$33 range.

From the Bear Cave: For bears, one option can be to play the UltraShort Lehman 20+ year Treasury ETF (TBT). This fund tracks twice the inverse of the corresponding Treasury Bond. Sell-stops can be set below $66.


Higher Prices at Mickey D’s

Reuters reports in an effort to deal with higher commodity costs, McDonald’s (MCD) is considering further price increases on some of its dollar menu items but the company said it would do nothing that slowed customer traffic into its stores. CEO Jim Skinner said he didn’t think costumers would care if some items moved slightly away from the dollar and he confirmed that the company wouldn’t get rid of the dollar menu completely because it was a key part of bringing customers into its stores. For the year prices have risen 4% in the U.S., but that only accounts for half of the average annual gain in commodities that MCD faces. See Professor Scott Reeves’ column, Mcflation.

From the Bull Pen: An ability to increase prices without affecting consumer demand is a sign of a very good company. Bulls can set sell-stops in the short term below $60.

From the Bear Cave: Bears can look to Chipotle Mexican Grill (CMG). A rally to $80 would mark the top of its downward price channel and could get bear interested. Buy-stops can be set above that level.


For more ideas in real time throughout the trading day, check out Minyanville’s Buzz & Banter.


Quick Check Around the World

Asian trading closed with the Hang Seng +0.70%, Nikkei -0.98%, Sensex +0.29%, Taiwan -0.02% and Shanghai +0.30%.

A quick check across the pond finds the CAC +1.08%, DAX +0.30%, FTSE +0.47%

As of 8:20 AM EST, S&P futures are down 6 points to 1281, and Nasdaq futures are lower by 6 points to 1890.


A Look At Commodities

Commodities are mostly higher. Crude oil is up +1.83 to 120.39. Gold is up +6.60 to 882.20.Silver is higher +0.135 to 16.640, and copper is down -1.15 to 345.15.

The dollar index is lower -0.208 to 74.037.


On the Radar

Economics

8:30 Initial Jobless Claims; 420k cons, 448k prior
8:30 Continuing Claims; 3265k cons, 3282k prior
10:00 Pending Home Sales MoM; -1.0% cons, -4.7% prior
10:00 ICSC Chain Store Sales YoY; 4.3% prior
15:00 Consumer Credit; $6.8 bln cons, $7.8 bln prior

Good luck today!