ISM, Bernanke push Treasuries higher

The ISM Non-Manufacturing (read = service industry) came out weaker today, most notably in the prices-paid area, which declined from 72.4 to 56.7. I'm sure a lot of that is energy-related, but still, a massive decline.

Treasury market shot up about 3/8 on the news. It has held there after a Bernanke speech on savings. The speech is interesting in and of itself, but includes nothing on monetary policy or near-term economic issues. In the Q&A he did say that housing was in the midst of a "substantial correction," and would be a drag on economic growth. On the other hand, he said explicitly that inflation is current above "what we would consider price stability."

I think this is another example of the Fed building a case for a cut or two in 2007. I still am searching for the evidence that the Fed will be more aggressive than that, which would justify current bond market levels.