The bond and mortgage markets under pressure to start the week. After last week’s Greek parliament voted to accept the creditors’ demands to increase austerity on Wednesday, Greece and the months-long daily dose of news quiet has descended on the region. Today Greek banks are now open after Greece agreed to pay €6.8B to creditors; money owed to the European Central Bank, the International Monetary Fund and Greece’s central bank. Banks can now replace the daily cash withdrawal limit of 60 euros with a weekly limit of 420 euros, though transfers abroad from Greek accounts remain banned. The Greek government still faces a parliamentary vote Wednesday on a second package of prerequisites for further financial assistance, including tax increases on farmers. Last week’s vote prompted some members of the Syriza party to rebel, forcing the Greek prime minister to reshuffle his cabinet on Friday. Greece’s problems haven’t been touched yet; sure the country agreed and the creditors agreed to provide bailout monies but the real point that hasn’t been faced head on yet is debt relief; as presently constituted Greece cannot now or in the future pay its debts.
Not much in the way of data this week but what there is has teeth; June existing and new home sales. Last week the 10 yr note yield declined 7 bps to 2.34%, 30 yr MBS price +37 bps on the week. This morning in early trading the 10 started up 3 bps at 2.37% and 30 yr MBS price down 13 bps.
At 9:30 the DJIA opened +22, NASDAQ +12, S&P +2. 10 yr at 2.38% +4 bps, 30 yr MBS price -17 bps frm Friday’s close and unchanged frm 9:30 Friday morning.
How strong is the US economy? Ask 10 people and you would get 10 different views. The Fed touts the recovery of jobs as a reason to begin increasing the FF rate later this year. The Fed believes inflation is going to move to its long-held 2.0% target. Stock market investors while talking the talk are not walking the walk now, the key indexes are inching higher but compared to the bullish forecasts the movements don’t match the hoopla frm analysts and economists. Last week the NFIB (National Federation of Independent Business) released its June data, not as strong as the consensus is that growth is increasing:
“OVERVIEW: SMALL BUSINESS OPTIMISM INDEX DROPS 4.2 POINTS”
“Another promising string of early in the year improvements in owner optimism was terminated in June, with the Index of Small Business Optimism falling 4.2 points to 94.1, well below the 42 year average. It’s beginning to look like a bad habit. Nine of the ten Index components fell, 1 was unchanged from last month. Declines in spending plans accounted for 30 percent of the Index decline and weaker expectations for real sales and business conditions another 20 percent. Earnings trends deteriorated, accounting for a quarter of the decline. The job components accounted for 20 percent of the loss, as did the inventory components. Actual reports of capital outlays rose, but plans to make outlays in the coming months declined. Not a recession signal, but not supportive of an optimistic view of growth in the second half.
Owners in the “shale states” were more pessimistic or about the same as owners in non-shale states, depending on how “shale state” is defined. There are interesting differences in the Index components."
PRICES @ 10:00 AM
10 yr note: -10/32 (31 bp) 2.38% +4 bp
5 yr note: -6/32 (18 bp) 1.71% +4 bp
2 Yr note: -2/32 (6 bp) 0.70% +3 bp
30 yr bond: -10/32 (31 bp) 3.10% +2 bp
Libor Rates: 1 mo 0.190%; 3 mo 0.291%; 6 mo 0.460%; 1 yr 0.775%
30 yr FNMA 3.5 Aug: @9:30 102.86 -17 bp (unch frm 9:30 Friday)
15 yr FNMA 3.0: @9:30 103.34 -14 bp (+1 bp frm 9:30 Friday)
30 yr GNMA 3.5: @9:30 103.58 -17 bp (+1 bp frm 9:30 Friday)
Dollar/Yen: 124.33 +0.24 yen
Dollar/Euro: $1.0839 +$0.0009
Gold: $1110.80 -$21.10 (five year low)
Crude Oil: $50.64 -$0.25
DJIA: 18,076.89 -9.56
NASDAQ: 5213.56 +3.41
S&P 500: 2124.87 -1.77
Not much in the way of data this week but what there is has teeth; June existing and new home sales. Last week the 10 yr note yield declined 7 bps to 2.34%, 30 yr MBS price +37 bps on the week. This morning in early trading the 10 started up 3 bps at 2.37% and 30 yr MBS price down 13 bps.
At 9:30 the DJIA opened +22, NASDAQ +12, S&P +2. 10 yr at 2.38% +4 bps, 30 yr MBS price -17 bps frm Friday’s close and unchanged frm 9:30 Friday morning.
How strong is the US economy? Ask 10 people and you would get 10 different views. The Fed touts the recovery of jobs as a reason to begin increasing the FF rate later this year. The Fed believes inflation is going to move to its long-held 2.0% target. Stock market investors while talking the talk are not walking the walk now, the key indexes are inching higher but compared to the bullish forecasts the movements don’t match the hoopla frm analysts and economists. Last week the NFIB (National Federation of Independent Business) released its June data, not as strong as the consensus is that growth is increasing:
“OVERVIEW: SMALL BUSINESS OPTIMISM INDEX DROPS 4.2 POINTS”
“Another promising string of early in the year improvements in owner optimism was terminated in June, with the Index of Small Business Optimism falling 4.2 points to 94.1, well below the 42 year average. It’s beginning to look like a bad habit. Nine of the ten Index components fell, 1 was unchanged from last month. Declines in spending plans accounted for 30 percent of the Index decline and weaker expectations for real sales and business conditions another 20 percent. Earnings trends deteriorated, accounting for a quarter of the decline. The job components accounted for 20 percent of the loss, as did the inventory components. Actual reports of capital outlays rose, but plans to make outlays in the coming months declined. Not a recession signal, but not supportive of an optimistic view of growth in the second half.
Owners in the “shale states” were more pessimistic or about the same as owners in non-shale states, depending on how “shale state” is defined. There are interesting differences in the Index components."
PRICES @ 10:00 AM
10 yr note: -10/32 (31 bp) 2.38% +4 bp
5 yr note: -6/32 (18 bp) 1.71% +4 bp
2 Yr note: -2/32 (6 bp) 0.70% +3 bp
30 yr bond: -10/32 (31 bp) 3.10% +2 bp
Libor Rates: 1 mo 0.190%; 3 mo 0.291%; 6 mo 0.460%; 1 yr 0.775%
30 yr FNMA 3.5 Aug: @9:30 102.86 -17 bp (unch frm 9:30 Friday)
15 yr FNMA 3.0: @9:30 103.34 -14 bp (+1 bp frm 9:30 Friday)
30 yr GNMA 3.5: @9:30 103.58 -17 bp (+1 bp frm 9:30 Friday)
Dollar/Yen: 124.33 +0.24 yen
Dollar/Euro: $1.0839 +$0.0009
Gold: $1110.80 -$21.10 (five year low)
Crude Oil: $50.64 -$0.25
DJIA: 18,076.89 -9.56
NASDAQ: 5213.56 +3.41
S&P 500: 2124.87 -1.77
