The bond market is markedly higher (interest rates lower) on continuing expectation out of Europe. Spain, widely believed to be the next country under Greek-like distress, has taken over one of it’s non-performing banks. Now, this is isolated, and not systemic; but the fact remains that there are real lingering questions in the investment community as to whether the European assistance will be enough to contain all of this — or whether this will inevitably spread to the rest of Europe — and beyond.

So for this reason, money continues to flow out of Europe, and into the US — suppressing our interest rates. Technically, however, we are in a slightly overbought condition; so there is some expectation that rates will rise above the current (as of this posting) 3.15% — with technical targets around 3.3%. So keep an eye. Long term fundamentals are such that interest rates will remain low; but today may see a spike.

Home prices, according to the S&P/Case-Shiller index (of property values in 20 cities) was announced to have increased 2.3 percent in March from a year earlier. This is good news for the housing market, and indicates that economic recovery is beginning. The only real question is whether this is the tide coming in, or the waves on the seashore. We hope for the tide; but the fundamentals in this country–particularly if we continue to spend the way that Greece and Spain have done–do not promise a good outcome.

It is this very dynamic that’s on the mind of the investment community — short term/long term. But the market rarely moves to the issues of long term.

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