The bond market is selling off this morning primarily due to a moderation of expectations the market has for the size and scope of the Federal Reserve’s second round of quantitative easing. This recalibration is also affecting currency markets, with the USD gaining against most currencies.

This lift in rates comes in spite of marginally negative economic data, which would usually cause rates to fall. US Durable Goods Orders for September were up 3.3% (consensus +2.0%), but Durable Goods ex Transportation was weak at -0.8% (consensus was +0.5%). The Transportation segment is very volatile so the latter measure is the one that tends to be more closely watched.

At 10am, US New Home Sales for September will be released, and expectations are extremely modest given the high number of existing vacant homes.

There is some important North American data being released on Friday:

-          In the US, this includes the advance Q3 GDP growth estimate and the Chicago PMI

-          For Canada, this includes August GDP growth and the Industrial Products Price Index (Sep)

Today’s main headline grabber will probably be the latest chapter in the Dow 10,000 saga…but there is more out there.

The string of poor US data continues, with Durable Goods Orders growth for July of 0.3% falling short of the 3.0% expectation. Excluding Transportation, Durable Goods Orders fell 3.8% while the market had expected a +0.5% reading.

At 10am US New Home Sales for July were released. The market was cautiously looking for 330k annualized (same as June, and well below the 850k – 1,400k range over 2001 to 2007), but got 276k instead, and the June number was revised lower to 315k as well. The past several months have been the lowest in this data set going back to 1963.