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| Monday, November 08, 2010 | ||
| Interest rate markets are flat this morning with no driving news and ahead of this afternoon's $32B 3 yr note auction. No economic data today, a few Fed speakers but not expected to rock the boat. Treasury is conducting its quarterly refunding this week, auctioning a total of $72B of treasuries; today the 3 yr note, tomorrow $24B of 10 yr notes and o Wednesday $16B of 30 yr bonds.
Not much in the data world this week; on Thursday the bond and mortgage markets will be closed for Veteran's Day while equity and futures markets will stay open. At 9:30 the DJIA opened down 43, the 10 yr note at 9:30 +2/32 with its rate at 2.53%, mortgage prices that traded unchanged until 9:30 were up 2/32 (.06 bp).
Still a lot of hand-wringing around the world over the Fed's decision to buy $600B of treasuries. Most central bankers worry over the potential of currency wars with countries trying to drive their currencies lower to capture export business. Unlikely that will occur but with the Fed out at the edge with its QE uncertainty is the dominating concern now. Over the weekend Bernanke commented the Fed isn't aiming at an increase in inflation, really? What Bernanke meant to imply (we suppose) is that the Fed isn't trying to set off an inflationary spiral but in an attempt to drive off deflation fears, the Fed does want the level of inflation to increase to its general target of 2.0% to 2.5% frm 1.0% presently. “I have rejected any notion that we are going to raise inflation to a super-normal level in order to have effects on the economy,” Bernanke said in a panel discussion at a Fed conference in Jekyll Island, Georgia. “It’s critical for us to maintain inflation at an appropriate level.” Friday G-20 meets with leaders of their countries; looks like the US will have a lot to convince other G-20 countries that we are on the correct path.
Since the FOMC meeting on 9/21 when the Fed said it was prepared to add additional stimulus with another QE the bellwether 10 yr note and mortgage rates have rallied, then retreated to leave those rates slightly lower but so far there has not been the move many were expecting. Many analysts and economists were forecasting the 10 yr note would fall to 2.25% frm 2.50% area now. We thought then, and now, that rates would not likely fall much on the easing. If, as the Fed believes, interest rates at the short and belly of the curve stay generally low it will add growth in the economy and likely edge inflation up a tad; hard to paint the picture of much lower long term rates under those circumstances.
This Week's Economic Calendar: Today; 1:00 pm $32B 3 yr note auction Tuesday; 10:00 am Sept wholesale inventories (+0.6%) 1:00 pm $24B 10 yr note auction Wednesday; 7:00 am MBA mortgage applications (N/A) 8:30 am weekly jobless claims (-7K to 450K) Sept trade deficit (-$45.0B) Oct import and export prices (N/A) 1:00 pm $16B 30 yr bond auction 2:00 pm Oct Treasury budget (-$140B) Thursday; Veteran's Day bond and mtg markets closed; stocks trade Friday; 9:55 am U. of Michigan mid-month consumer sentiment index (69.0 frm 67.7)
We expect a generally quiet day in the rate markets with little changes by the end of the day. | ||
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