Tonight's Money Supply Report

M2 rebounded in the most recent money supply figures released by the Federal Reserve.

The preliminary January 31st measure stood at $8.868 trillion. Annualized M2 growth over the past 13 weeks was 4.9% vs. annualized growth of 5.1% and 3.7% for the past 26 and 52 weeks. While the strong surge in M2 first noted last fall has eased somewhat, M2 growth continues to trend in a direction that suggests inflationary risks are increasing. Prices on U.S. Treasury bonds have begun to reflect those inflationary fears as yield on the 30-Year are now over 4 3/4%. Rates on 30-year fixed mortgages have also risen sharply this week and have now surpassed 5%.

Tonight's Money Supply Report

M2 contracted slightly in the most recent money supply report released by the Federal Reserve tonight.

The preliminary January 24th measure stood at $8.828 trillion. Annualized M2 growth over the past 13 weeks was 5.0% vs. annualized growth of 5.1% and 3.6% for the past 26 and 52 weeks.

Treasury bonds this week have performed horribly. And at the close this evening, the yield on the 30-Year was up to 4.66%, it's highest close since April of last year. I expect bond yields to continue to rise through the year, and for bond prices to continue to decline. Given recent price action, Treasury Bonds are not as attractive as a short candidate as they had been in September and October. At this juncture, I would not add any new short positions in Treasury bonds. However, I would still avoid purchasing them in this monetary environment.