Economic Data for Friday July 31, 2009

The Q2 employment cost index rose 0.4%, higher than the expected 0.3% increase which is generally not bond friendly.

The Q2 Advance GDP fell 1.0%, not as weak as the expected 1.5% decline and also generally not bond friendly.

However, the PCE Core Inflation rose 1.3%, weaker than the expected 1.4% increase. The core rose 2.0%, weaker than the expected 2.4% increase. These figures help alleviate some inflation concerns and generally bode well for bonds. Inflation, real or perceived, is the enemy of fixed income instruments eroding the value. Bonds generally like it when inflation is in check.