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Tuesday, January 31, 2012
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Mortgage Rates
Treasuries and MBS markets started flat this morning with stock indexes pointing to a better open at 9:30. At 8:30 Q4 employment cost index was right on, +0.4%, no reaction to it however. At 9:00 the Nov Case/Shiller 20 city home price index declined 0.7% frm Oct and -3.4% yr/yr as expected, no reaction to it.
In Europe the EU summit most countries in the European Union agreed to tighter budget controls. The EU completed a fiscal-discipline treaty that speeds sanctions on high-deficit states, requiring euro countries to anchor balanced-budget rules in national law. Eight countries outside the euro backed the pact, while Britain and the Czech Republic boycotted it. The meeting ended with German Chancellor Angela Merkel voicing frustration that Athens has failed to overhaul the Greek economy. “Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”
Greece aims to complete debt-swap talks with bondholders this week. Prime Minister Lucas Papademos told reporters after the summit that he is “strongly committed” to reaching a deal. Meeting at the 16th summit in two years, they also agreed to bring the region’s permanent bailout fund, the European Stability Mechanism, into operation on July 1, a year ahead of schedule. As far as traders are concerned there was no progress on Greece and the EU summit just another summit where a lot of talk and no direct action; steps in the right direction but slower than a snail in molasses.
UK consumer confidence improved in Jan according to gauge of sentiment it added 4 points from December to minus 29, the strongest reading since June. The increase in confidence and the reaction to the EU summit improved equity markets in the UK and Europe adding some thrust to US markets early this morning.
At 9:30 the DJIA opened +55, the 10 yr -2/32 at 1.85% unch and MBS prices -2/32 (.06 bp).
Jan Chicago purchasing managers’ index, expected at 62.5 unchanged from Dec; as released the index was lower at 60.2. The new orders component at 63.6 frm 67.1. prices pd index at 62.4 frm 63.8 and the employment index at 54.7 frm 59.2. There was no initial reaction to the data in the bond and mortgage markets but the key stock indexes backed off from the better levels prior to the report, still holding gains but lost about half of the improvement.
The final data today, at 10:00 Jan consumer confidence index for Jan was expected to have increased to 67.0 frm 64.5 in Dec; it was weaker, at 61.1 frm revised 64.8 in Dec. Two economic releases that were less than expected pulled equity markets back and put support in the interest rate sector.
The 10 yr at a resistance level between 1.85 and 1.80%. Most of the momentum oscillators are weakening a little but the wider perspective remains positive.
Treasuries and MBS markets started flat this morning with stock indexes pointing to a better open at 9:30. At 8:30 Q4 employment cost index was right on, +0.4%, no reaction to it however. At 9:00 the Nov Case/Shiller 20 city home price index declined 0.7% frm Oct and -3.4% yr/yr as expected, no reaction to it.
In Europe the EU summit most countries in the European Union agreed to tighter budget controls. The EU completed a fiscal-discipline treaty that speeds sanctions on high-deficit states, requiring euro countries to anchor balanced-budget rules in national law. Eight countries outside the euro backed the pact, while Britain and the Czech Republic boycotted it. The meeting ended with German Chancellor Angela Merkel voicing frustration that Athens has failed to overhaul the Greek economy. “Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”
Greece aims to complete debt-swap talks with bondholders this week. Prime Minister Lucas Papademos told reporters after the summit that he is “strongly committed” to reaching a deal. Meeting at the 16th summit in two years, they also agreed to bring the region’s permanent bailout fund, the European Stability Mechanism, into operation on July 1, a year ahead of schedule. As far as traders are concerned there was no progress on Greece and the EU summit just another summit where a lot of talk and no direct action; steps in the right direction but slower than a snail in molasses.
UK consumer confidence improved in Jan according to gauge of sentiment it added 4 points from December to minus 29, the strongest reading since June. The increase in confidence and the reaction to the EU summit improved equity markets in the UK and Europe adding some thrust to US markets early this morning.
At 9:30 the DJIA opened +55, the 10 yr -2/32 at 1.85% unch and MBS prices -2/32 (.06 bp).
Jan Chicago purchasing managers’ index, expected at 62.5 unchanged from Dec; as released the index was lower at 60.2. The new orders component at 63.6 frm 67.1. prices pd index at 62.4 frm 63.8 and the employment index at 54.7 frm 59.2. There was no initial reaction to the data in the bond and mortgage markets but the key stock indexes backed off from the better levels prior to the report, still holding gains but lost about half of the improvement.
The final data today, at 10:00 Jan consumer confidence index for Jan was expected to have increased to 67.0 frm 64.5 in Dec; it was weaker, at 61.1 frm revised 64.8 in Dec. Two economic releases that were less than expected pulled equity markets back and put support in the interest rate sector.
The 10 yr at a resistance level between 1.85 and 1.80%. Most of the momentum oscillators are weakening a little but the wider perspective remains positive.
Monday, January 30, 2012
Mortgage Rate Update
The rally in the bond and mortgage markets is continuing this morning, Europe stock markets weaker and US equity markets set to open lower at 9:30. Dec personal income and spending at 8:30 was in line with estimates; income up 0.5% against estimates of +0.4%. Dec spending unchanged against estimates of +0.1%; more evidence that holiday shopping didn’t meet those early lofty estimates. Spending stalled in December as Americans used a jump in incomes to restore depleted savings, indicating the biggest part of the economy will not be a driver of the expansion.
Last week Greek officials were “confident” that they could make a deal with creditors to fend off another debt default cliff. Nothing happened, not necessarily a surprise as we have been subjected to the continual uncertainty and lack of progress for two+ years now. Greece signaled opposition to economic oversight in exchange for aid, taking Italian interest rates higher this morning and driving equity markets lower. European Union leaders gather in Brussels today for their first summit of 2012 to put the finishing touches on a German-led deficit-control treaty and endorse a 500 billion-euro ($661 billion) rescue fund to be set up this year. Greece and its private creditors said Saturday they expect to complete a deal in coming days after bondholders signaled they would accept a bigger cut in their debt holdings----it never ends.
The DJIA opened -100; 10 yr note +17/32 1.83% -7 bp and MBS 30 yr prices +6/32 (.18 bp).
This week’s elephant is the Jan employment report on Friday; current estimates are an increase of 160K non-farm jobs and private non-farm jobs +170K, the unemployment rate at 8.5%. The actual unemployment rate is closer to 16% however, that the “official” rate is at 8.5% is evidence that many have simply dropped out of looking for jobs. Until the Fed revised estimates for growth downward for 2012 and 2013 last week and Q4 GDP advance report was weaker than forecasts (+2.8% against +3.1% expected) there was an increasing belief the economy was gaining a little momentum. Now economic bulls are re-thinking that idea.
The bellwether 10 yr note is working on a key resistance level at 1.80% this morning. In early trade it dropped to 1.82% and at 10:00 sitting at 1.83%. The MBSs are pushing into new highs in prices not seen in over a year. The Fed’s decision to leave the FF rate at 0.0% for the next three years and with no inflation now or on the horizon, the long end of the curve is seeing buying as investors seek yield. The safety trade over Europe’s debt crisis has ebbed recently but still plays a role in the decline in rates.
The rally in the bond and mortgage markets is continuing this morning, Europe stock markets weaker and US equity markets set to open lower at 9:30. Dec personal income and spending at 8:30 was in line with estimates; income up 0.5% against estimates of +0.4%. Dec spending unchanged against estimates of +0.1%; more evidence that holiday shopping didn’t meet those early lofty estimates. Spending stalled in December as Americans used a jump in incomes to restore depleted savings, indicating the biggest part of the economy will not be a driver of the expansion.
Last week Greek officials were “confident” that they could make a deal with creditors to fend off another debt default cliff. Nothing happened, not necessarily a surprise as we have been subjected to the continual uncertainty and lack of progress for two+ years now. Greece signaled opposition to economic oversight in exchange for aid, taking Italian interest rates higher this morning and driving equity markets lower. European Union leaders gather in Brussels today for their first summit of 2012 to put the finishing touches on a German-led deficit-control treaty and endorse a 500 billion-euro ($661 billion) rescue fund to be set up this year. Greece and its private creditors said Saturday they expect to complete a deal in coming days after bondholders signaled they would accept a bigger cut in their debt holdings----it never ends.
The DJIA opened -100; 10 yr note +17/32 1.83% -7 bp and MBS 30 yr prices +6/32 (.18 bp).
This week’s elephant is the Jan employment report on Friday; current estimates are an increase of 160K non-farm jobs and private non-farm jobs +170K, the unemployment rate at 8.5%. The actual unemployment rate is closer to 16% however, that the “official” rate is at 8.5% is evidence that many have simply dropped out of looking for jobs. Until the Fed revised estimates for growth downward for 2012 and 2013 last week and Q4 GDP advance report was weaker than forecasts (+2.8% against +3.1% expected) there was an increasing belief the economy was gaining a little momentum. Now economic bulls are re-thinking that idea.
The bellwether 10 yr note is working on a key resistance level at 1.80% this morning. In early trade it dropped to 1.82% and at 10:00 sitting at 1.83%. The MBSs are pushing into new highs in prices not seen in over a year. The Fed’s decision to leave the FF rate at 0.0% for the next three years and with no inflation now or on the horizon, the long end of the curve is seeing buying as investors seek yield. The safety trade over Europe’s debt crisis has ebbed recently but still plays a role in the decline in rates.
Sunday, January 29, 2012
Friday, January 27, 2012
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