Prior to 8:30 the bond and mortgage markets were essentially unchanged frm last Friday. At 8:30 the NY Fed Empire State manufacturing index, expected at +4.75, dropped to a huge decline down 14.92, the weakest since April 2009. New orders, which had already been weak in this report, fell from July's minus 3.50 to minus 15.70 for the weakest reading since November 2010. Backlog orders, which had also been weak, came in at minus 4.55 from minus 7.45. Shipments, in the weakest reading since March 2009, fell to minus 13.79 from positive 7.99. The initial reaction improved the MBS prices and took the 10 yr to 2.15% frm 2.19% on Friday. US stock indexes were about unchanged then on the report declined.
The NY Empire State report the stock indexes broke the back of indexes and boosted MBS prices; the DJIA opened 128, NASDAQ -26, S&P -12. The 10 yr note at 9:30 2.15% -4 bp and 30 yr MBS price +20 bps frm Friday’s close and +20 bps frm 9:30 Friday morning.
At 10:00 am the Aug NAHB housing market index, expected at 61 frm 60 in July was right on, buyer traffic increased frm 43 to 45; 50 is the line between contraction and expansion. Tomorrow housing starts are expected up 0.5% while permits are thought to have declined 9.0%.
Greece’s debt relief is increasing likely according to Angela Merkel in an interview yesterday. It will happen and markets have pushed its importance off the front page replaced by China’s economic downturn and its currency devaluation. Merkel said she fully expects the IMF will be an integral part of the debt relief and Greece getting the needed monies to pay the ECB; "I have no doubt that this will happen."
Factoid: The Fed has amassed $4.20 trillion in US treasuries that includes $1.73 trillion in mortgage backed securities in QEs since the 2008 financial market collapse. The main events this week are July housing starts and permits, July existing home sales and the FOMC minutes. Our models remain slightly bullish. Last week a lot of volatility but on the week MBS prices were down just 12 bps and the bellwether 10 yr note yield up 2 bps to 2.19%. There isn’t an overwhelming bullish bias but also no emphasis to push rates higher. Still data dependent and the Fed is on the clock about when interest rates will be increased. Economists still holding to a Sept increase while markets more believing not until Dec. Best to go with markets and discount economists; economists don’t have a very good grasp of things since 2008, no history to work frm. These last two weeks of August have generally had little volume as investors and traders take a final summer breather before Labor Day; that increases volatility as we saw last week.
This Week’s Calendar:
Today,
8:30 August Empire State (+4.75 expected, as reported -14.92)
10:00 am August HAHB housing market index (expected at 61 frm 60 in July, as reported
Tuesday,
8:30 am July housing starts and permits (starts +0.5% to 1180 units; permits -9.0% to 1230K units)
Wednesday,
7:00 am weekly MBA mortgage applications
8:30 am July CPI (+0.2% overall and +0.2% for the core)
2:00 pm FOMC minutes frm the July meeting
Thursday,
8:30 am weekly jobless claims (-4K to 270K)
10:00 am July existing home sales (-2.7% to 5.40 mil unit annualized frm 5.49 mil in June)
August Philadelphia Fed business outlook (7.5 frm 5.7 in July)
July leading economic indicators (+0.2% frm +0.6% in June)
PRICES @ 10:05 AM
10 yr note: +12/32 (37 bp) 2.16% -3 bp
5 yr note: +6/32 (18 bp) 1.56% -3 bp
2 Yr note: +2/32 (6 bp) 0.70% -2 bp
30 yr bond: +21/32 (65 bp) 2.81% -3 bp
Libor Rates: 1 mo 0.199%; 3 mo 0.324%; 6 mo 0.524%; 1 yr 0.844%
30 yr FNMA 3.5 Sept: @9:30 103.55 +20 bp (+20 bp frm 9:30 Friday)
15 yr FNMA 3.0: @103.58 -9 bp (-14 bp frm 9:30 Friday)
30 yr GNMA 3.5: @104.19 +16 bp (+11 bp frm 9:30 Friday)
Dollar/Yen: 124.32 +0.01 yen
Dollar/Euro: $1.1095 -$0.0014
Gold: $1120.30 +$7.60
Crude Oil: $42.13 -$0.37
DJIA: 17,387.64 +89.76 (40 points better than on the open)
NASDAQ: 5033.47 -14.77
S&P 500: 2083.45 -8.09
The NY Empire State report the stock indexes broke the back of indexes and boosted MBS prices; the DJIA opened 128, NASDAQ -26, S&P -12. The 10 yr note at 9:30 2.15% -4 bp and 30 yr MBS price +20 bps frm Friday’s close and +20 bps frm 9:30 Friday morning.
At 10:00 am the Aug NAHB housing market index, expected at 61 frm 60 in July was right on, buyer traffic increased frm 43 to 45; 50 is the line between contraction and expansion. Tomorrow housing starts are expected up 0.5% while permits are thought to have declined 9.0%.
Greece’s debt relief is increasing likely according to Angela Merkel in an interview yesterday. It will happen and markets have pushed its importance off the front page replaced by China’s economic downturn and its currency devaluation. Merkel said she fully expects the IMF will be an integral part of the debt relief and Greece getting the needed monies to pay the ECB; "I have no doubt that this will happen."
Factoid: The Fed has amassed $4.20 trillion in US treasuries that includes $1.73 trillion in mortgage backed securities in QEs since the 2008 financial market collapse. The main events this week are July housing starts and permits, July existing home sales and the FOMC minutes. Our models remain slightly bullish. Last week a lot of volatility but on the week MBS prices were down just 12 bps and the bellwether 10 yr note yield up 2 bps to 2.19%. There isn’t an overwhelming bullish bias but also no emphasis to push rates higher. Still data dependent and the Fed is on the clock about when interest rates will be increased. Economists still holding to a Sept increase while markets more believing not until Dec. Best to go with markets and discount economists; economists don’t have a very good grasp of things since 2008, no history to work frm. These last two weeks of August have generally had little volume as investors and traders take a final summer breather before Labor Day; that increases volatility as we saw last week.
This Week’s Calendar:
Today,
8:30 August Empire State (+4.75 expected, as reported -14.92)
10:00 am August HAHB housing market index (expected at 61 frm 60 in July, as reported
Tuesday,
8:30 am July housing starts and permits (starts +0.5% to 1180 units; permits -9.0% to 1230K units)
Wednesday,
7:00 am weekly MBA mortgage applications
8:30 am July CPI (+0.2% overall and +0.2% for the core)
2:00 pm FOMC minutes frm the July meeting
Thursday,
8:30 am weekly jobless claims (-4K to 270K)
10:00 am July existing home sales (-2.7% to 5.40 mil unit annualized frm 5.49 mil in June)
August Philadelphia Fed business outlook (7.5 frm 5.7 in July)
July leading economic indicators (+0.2% frm +0.6% in June)
PRICES @ 10:05 AM
10 yr note: +12/32 (37 bp) 2.16% -3 bp
5 yr note: +6/32 (18 bp) 1.56% -3 bp
2 Yr note: +2/32 (6 bp) 0.70% -2 bp
30 yr bond: +21/32 (65 bp) 2.81% -3 bp
Libor Rates: 1 mo 0.199%; 3 mo 0.324%; 6 mo 0.524%; 1 yr 0.844%
30 yr FNMA 3.5 Sept: @9:30 103.55 +20 bp (+20 bp frm 9:30 Friday)
15 yr FNMA 3.0: @103.58 -9 bp (-14 bp frm 9:30 Friday)
30 yr GNMA 3.5: @104.19 +16 bp (+11 bp frm 9:30 Friday)
Dollar/Yen: 124.32 +0.01 yen
Dollar/Euro: $1.1095 -$0.0014
Gold: $1120.30 +$7.60
Crude Oil: $42.13 -$0.37
DJIA: 17,387.64 +89.76 (40 points better than on the open)
NASDAQ: 5033.47 -14.77
S&P 500: 2083.45 -8.09
