Mortgage Rates
Very early this morning the US stock indexes were weak following Europe’s equity markets; the 10 yr note at 7:00 am -2/32. By 8:30 however the 10 yr note fell further, down 11/32 at 1.94% +4 bp, MBS prices -2/32 (.06 bp). This is another day with no economic data until 3:00 this afternoon when Dec consumer credit is reported (+$8.5B). At 1:00 Treasury will auction $32B of 3 yr notes, last month’s 3 yr auction drew the largest demand on record for a 3 yr note.
A little volatility early this morning when a story hit that Greece was close to a deal to avoid default, it didn’t last long though as there were no follow-up details. No one will jump the gun on Greece’s ability to get a deal with creditors resolved given that Greek officials have constantly said a deal was close and would be completed in “a few days”.
German Chancellor Angela Merkel said time was running out for Greece to accept conditions for a bailout. Meanwhile Greek Prime Minister Lucas Papademos meets political leaders today to discuss more cuts needed to get a rescue package. They have already agreed to make further cuts this year equal to 1.5% of gross domestic product, they have yet to decide how to recapitalize banks, ensure the viability of pension funds and reduce wages to increase the economy’s competitiveness. Yesterday the Prime Minister was reported to have asked for a detailed analysis from his staff on how Greece will fair if it decides to simply default.
In this global economy, markets pay a lot of attention to what is occurring in Europe and China; China’s industrial output growth will probably slow this quarter as the world economy cools and the euro area’s crisis worsens, the Ministry of Industry and Information Technology said today. “The global economy is slowing down, Europe’s sovereign-debt crisis is deepening and the downside risks to the world economy are rising with international demand still slack and global commodities and financial markets continuing to be volatile,” the ministry said. German industrial output unexpectedly dropped the most in three years in December as Europe’s debt crisis weighed on confidence and the global economic slowdown damped demand. Production fell 2.9% from November, when it stagnated, the Economy Ministry in Berlin said today. Economists had expected output to remain unchanged.
I guess it is obvious that Europe’s debt crisis is so extreme that coming up with any solution is elusive at best. Banks won’t be able to take the haircut necessary, the ECB doesn’t have the funds to absorb much of the massive debt and the IMF won’t do much until there is some kind of assurance the EU countries can manage their budgets with huge spending cuts. In the meantime the economy in Europe is teetering on the edge and holding back what might be a solid global economic rebound. In the case of Greece, if it does default the repercussions in US markets may not be as serious as investors now believe. Estimates we hear are that the US equity market might lose 3.0% to 5.0% if Greece defaults; not good but if that were all there is likely it would be recovered quickly. Where the serious implications occur is a Greek default would likely leads to other sovereigns tossing in the towel unwinding the EU.
The DJIA opened -20 at 9:30, the 10 yr note -14/32 the weakest so far at 1.95% +5 bp. MBS prices holding but likely lenders will price defensively, at 9:30 -2/32 (.06 bp).
Fed chair Bernanke will testify on the economy at 10:00 at the Senate Budget Committee.
Technically the 10 yr note is presently testing its 40 day MA at 1.95%, a close above 1.95% would support a move to 2.00%. The relative strength index is at neutral 50. Although the note looks a little soft so far today, it is unlikely that interest rates will increase much; equally as we have commented a few times, we do not believe there is a lot left in the present rally. The 10 yr has a wall at 1.80%; it is in a range between 2.00% and 1.80% and likely will stay there. Mortgage rates also confined to a 15 to 20 basis point range in rates.
Tuesday, February 7, 2012
Monday, February 6, 2012
Mortgage Rates
Treasuries and mortgages opened unchanged this morning with no news. Greece still can’t finalize anything on their debt workout; three weeks and counting since Greek officials said they were close to an agreement with creditors. Last week’s Jan employment report was much better than even the most optimistic forecasts and counter to the pessimistic outlook delivered from the Fed at the conclusion of the Jan 25th FOMC meeting. Not only the employment data stronger but the two ISM reports for Jan (manufacturing and service sector) were better than what had been expected.
European bank supervisors may discuss easing requirements for lenders to hold capital against sovereign debt this week as part of more than 30 meetings this month to track banks’ progress in complying with updated requirements, two people with knowledge of the discussions said. After three weeks of discussions and nothing coming from it Fitch said a Greek disorderly default “cannot be wholly discounted.” “Fitch expects Greece to undertake an orderly debt restructuring, which would ensure that a payment system is in place,” the ratings company said in a statement today. “However, a disorderly default, which may include an exit from the euro zone, cannot be wholly discounted.” European leaders stepped up pressure on Greek politicians to accept the conditions for a 130 billion-euro ($171 billion) bailout, saying time was running out.
Today we have no scheduled reports; this week the economic calendar doesn’t offer much. Treasury will auction $72B of notes and bonds this week beginning tomorrow through Thursday.
At 9:30 the DJIA opened -60, the 10 yr note -3/32 to 1.94% +1.5% and mortgage prices +1/32 (.03 bp). Treasuries facing auctions this week are hanging back with yields unchanged after Friday’s drumming over the Jan employment report.
This Week’s Economic Calendar:
Tuesday;
1:00 pm $32B 3 yr note auction
3:00 pm Dec consumer credit (+$8.5B, +$20.4B in Nov)
Wednesday;
7:00 am MBA mortgage applications
1:00 pm $24B 10 yr note auction
Thursday;
8:30 am weekly jobless claims (+3K to 370K; continuing claims 3.475 mil frm 3.437 mil)
10:00 am Dec wholesale inventories (+0.4%)
1:00 pm $16B 30 yr bond auction
Friday;
8:30 am Dec trade balance (-$48.2B)
9:55 am U. of Michigan sentiment index (74.0 frm 75.0)
2:00 pm Jan Treasury budget (-$40.0B)
Treasuries continue to weaken this morning, after opening slightly better the 10 yr note at 10:00 -4/32 at 1.94% +1.5% with MBS trade -1/32 (.03 bp) at 10:00. Technically still positive but softening now. As we have noted countless times, the 10 yr note struggles when it falls below 2.00%, mortgage rates remain subject to treasuries and also have demonstrated an inability to fall when at the present levels. Safe haven to treasuries has waned even with the potential of Greece deflating. Traders don’t believe Greece will default even with nothing being finalized for weeks and the clock ticking for Greece to make its next payment next month.
Treasuries and mortgages opened unchanged this morning with no news. Greece still can’t finalize anything on their debt workout; three weeks and counting since Greek officials said they were close to an agreement with creditors. Last week’s Jan employment report was much better than even the most optimistic forecasts and counter to the pessimistic outlook delivered from the Fed at the conclusion of the Jan 25th FOMC meeting. Not only the employment data stronger but the two ISM reports for Jan (manufacturing and service sector) were better than what had been expected.
European bank supervisors may discuss easing requirements for lenders to hold capital against sovereign debt this week as part of more than 30 meetings this month to track banks’ progress in complying with updated requirements, two people with knowledge of the discussions said. After three weeks of discussions and nothing coming from it Fitch said a Greek disorderly default “cannot be wholly discounted.” “Fitch expects Greece to undertake an orderly debt restructuring, which would ensure that a payment system is in place,” the ratings company said in a statement today. “However, a disorderly default, which may include an exit from the euro zone, cannot be wholly discounted.” European leaders stepped up pressure on Greek politicians to accept the conditions for a 130 billion-euro ($171 billion) bailout, saying time was running out.
Today we have no scheduled reports; this week the economic calendar doesn’t offer much. Treasury will auction $72B of notes and bonds this week beginning tomorrow through Thursday.
At 9:30 the DJIA opened -60, the 10 yr note -3/32 to 1.94% +1.5% and mortgage prices +1/32 (.03 bp). Treasuries facing auctions this week are hanging back with yields unchanged after Friday’s drumming over the Jan employment report.
This Week’s Economic Calendar:
Tuesday;
1:00 pm $32B 3 yr note auction
3:00 pm Dec consumer credit (+$8.5B, +$20.4B in Nov)
Wednesday;
7:00 am MBA mortgage applications
1:00 pm $24B 10 yr note auction
Thursday;
8:30 am weekly jobless claims (+3K to 370K; continuing claims 3.475 mil frm 3.437 mil)
10:00 am Dec wholesale inventories (+0.4%)
1:00 pm $16B 30 yr bond auction
Friday;
8:30 am Dec trade balance (-$48.2B)
9:55 am U. of Michigan sentiment index (74.0 frm 75.0)
2:00 pm Jan Treasury budget (-$40.0B)
Treasuries continue to weaken this morning, after opening slightly better the 10 yr note at 10:00 -4/32 at 1.94% +1.5% with MBS trade -1/32 (.03 bp) at 10:00. Technically still positive but softening now. As we have noted countless times, the 10 yr note struggles when it falls below 2.00%, mortgage rates remain subject to treasuries and also have demonstrated an inability to fall when at the present levels. Safe haven to treasuries has waned even with the potential of Greece deflating. Traders don’t believe Greece will default even with nothing being finalized for weeks and the clock ticking for Greece to make its next payment next month.
Sunday, February 5, 2012
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