Early trade this morning stock markets globally rallying on news that China is lowering rates again, the sixth time in less than a year to prop up its economy. The benchmark lending rate cut by 0.25%, the one year rate now 4.35% frm 4.60%; the one year deposit rate to 1.50% frm 1.75%. The central bank also lowered the reserve requirements for banks by 0.5% to 17.5%. Yesterday in the EU the ECB’s Mario Draghi hinted more QE may be coming in December to fend off deflation kin the Zone.
The reaction yesterday to the ECB comment sent US stocks on a buying binge; the DJIA up 321, this morning on the China news early morning trading had the DJIA up another 150 points prior to the 9:30 open. The bellwether 10 yr note yield in early trading up to 2.09%, MBS prices down -17 bps at 9:00.
Tech stocks yesterday blew the doors off with stronger than expected earnings adding to the momentary run-up in equity markets. So far earnings reports have been generally better than thought overall, though companies that are multi-national earners like Caterpillar have experienced declines. It can’t be much better than it is now in the stock world, here and in Europe as well as Asia. Markets in Asia soared to their highest levels in two months on bets of easy-money policies from global central banks. The ECB yesterday, China today and next week the FOMC will likely make another attempt to paint the US economy in bright colors. A momentary perfect storm.
The global equity market improvement has pushed US interest rates slightly higher; the 10 yr note this morning at 2.09% +7 bps and above its 20 day and testing its 40 day average. Not too bad given the way markets are trading the last two sessions. Still the lack of inflation and concerns that the current mania will ebb soon are keeping rates well-contained. We have been concerned for two weeks that the 10 yr note was running into strong resistance at 2.00%, the inability to break the technical and psychological has lessened traders’ appetite for treasuries for the time being, but the backup in rates has been minor.
At 9:30 the DJIA opened +125, NASDAQ +92, S&P +19. The 10 yr note 2.08% +6 bps and MBS price on FNMA 3.5 coupon -16 bps frm yesterday’s close but unchanged frm 9:30 yesterday. It is encouraging that rates are holding well in the current mania driven by global central banks. Still have the FOMC meeting next week, the strong opening today in stocks may be the highs of the session going into the weekend but the fever is running high presently.
No data today. We appreciate how the bond and mortgage markets are acting this morning in the face of the global central banks on slot of easing the last 48 hours. As long as the 10 yr note yield holds below 2.15% the broader outlook remains bullish. No matter how central banks are acting now, no matter the stronger earnings in tech stocks, neither of them have any direct influence on consumers and consumer spending. Wages stagnant and low will keep growth mediocre at best; retail recently weak, most surveys on consumers report declining optimism; the idea that low gasoline prices will stoke consumer spending has yet to materialize. Standing in the wings, the coming debt ceiling concerns.
The reaction yesterday to the ECB comment sent US stocks on a buying binge; the DJIA up 321, this morning on the China news early morning trading had the DJIA up another 150 points prior to the 9:30 open. The bellwether 10 yr note yield in early trading up to 2.09%, MBS prices down -17 bps at 9:00.
Tech stocks yesterday blew the doors off with stronger than expected earnings adding to the momentary run-up in equity markets. So far earnings reports have been generally better than thought overall, though companies that are multi-national earners like Caterpillar have experienced declines. It can’t be much better than it is now in the stock world, here and in Europe as well as Asia. Markets in Asia soared to their highest levels in two months on bets of easy-money policies from global central banks. The ECB yesterday, China today and next week the FOMC will likely make another attempt to paint the US economy in bright colors. A momentary perfect storm.
The global equity market improvement has pushed US interest rates slightly higher; the 10 yr note this morning at 2.09% +7 bps and above its 20 day and testing its 40 day average. Not too bad given the way markets are trading the last two sessions. Still the lack of inflation and concerns that the current mania will ebb soon are keeping rates well-contained. We have been concerned for two weeks that the 10 yr note was running into strong resistance at 2.00%, the inability to break the technical and psychological has lessened traders’ appetite for treasuries for the time being, but the backup in rates has been minor.
At 9:30 the DJIA opened +125, NASDAQ +92, S&P +19. The 10 yr note 2.08% +6 bps and MBS price on FNMA 3.5 coupon -16 bps frm yesterday’s close but unchanged frm 9:30 yesterday. It is encouraging that rates are holding well in the current mania driven by global central banks. Still have the FOMC meeting next week, the strong opening today in stocks may be the highs of the session going into the weekend but the fever is running high presently.
No data today. We appreciate how the bond and mortgage markets are acting this morning in the face of the global central banks on slot of easing the last 48 hours. As long as the 10 yr note yield holds below 2.15% the broader outlook remains bullish. No matter how central banks are acting now, no matter the stronger earnings in tech stocks, neither of them have any direct influence on consumers and consumer spending. Wages stagnant and low will keep growth mediocre at best; retail recently weak, most surveys on consumers report declining optimism; the idea that low gasoline prices will stoke consumer spending has yet to materialize. Standing in the wings, the coming debt ceiling concerns.
