Bernanke Testifies This Week...Uncle Sam To Auction $78B In Notes This Week...

While the economic calendar is filled mostly with “nice to know” economic releases this week, the market will focus its attention on Uncle Sam’s treasury auction, Federal Reserve Chairman Bernanke’s testimony in front of the House Financial Services Committee and January Retail Sales data. Uncle Sam will hold yet another treasury auction to the tune of approximately $78B this week in 3,10 and 30 year notes. Given what is happening in the “world economy” regarding several countries defaulting on their debt, look for this auction to pan out pretty well which should keep rates at current levels. The 3 year notes should do well while there may be some question on the 30 year notes (auctioned on Thursday). The better the participation from foreign countries in these auctions, the better chance we will have to keep rates at current levels. Federal Reserve Chairman Bernanke will testify in front of the House Financial Services Committee on Wednesday. This will include a Q&A session. While I don’t expect anything earth shattering from his testimony, it is certainly something to watch especially the Q&A part of this session. Any comments that he believes the economy is emerging out of the recession now would be a concern for rates. Once again, I don’t believe this will happen but if it did...rates will move marginally higher. On Thursday, we will get a look at January Retail Sales numbers. The market is looking for an increase in sales of approximately .5% excluding auto sales as compared to a –.2% in December. A number above the expect .5% increase will not be good for rates as they will most likely move marginally to notably higher. Even with all of what I have reported that will happen this week, your best bet on which direction rates will head is to watch the DOW….Higher DOW...Higher rates….Lower DOW...Lower rates!