The day started quietly with little change in the rate markets and early trade in stocks had the indexes generally quiet. At 8:30 weekly claims unexpectedly increased 13K to 282K, the highest level in the last five months, the 4 wk average 270.75 up frm 269.25, still holding at the 270K level. Claims were expected to be abut unchanged; there was no noticeable market reaction to the increase. There has been a continuing decline in claims over the last three years.
Also at 8:30 Nov import and export prices; import prices were thought to be -0.8% were down just 0.4%, yr/yr import prices -9.4% up frm -10.5% in October. It was the fifth straight month, highlighting the drag on inflation from cheap oil, a strong dollar and slow overseas growth. Export prices expected -0.3% were down 0.6%, yr/yr -6.3% up frm -6.7% in October. No reaction to the report.
The stock market opened -13, NASDAQ and S&P -1. The 10 at 2.21% unchanged, MBS prices -3 bps frm yesterday’s close and +1 bp frm 9:30 yesterday.
This afternoon at 1:00 pm Treasury will complete this week’s borrowing with $13B of 30 yr bonds re-opening the Nov issue. Yesterday’s 10 yr auction was decent but not over-whelming. With the FF rate increase coming next week the demand for longer dated treasury debt has been good. The strong dollar contributing to good foreign demand. The dollar however has lost a lot of ground recently although still strong comparatively, the dollar has lost about $0.05 against the euro in the last couple of weeks with the ECB cutting rates while the Fed is expected to increase rates next week. Most European sovereign debt is rallying this morning, with yields at the 10-year maturity falling by 3-4 basis points in most countries. European government bonds have recovered the majority of their losses from the European Central Bank rate decision last Thursday.
The Bank of England held its main policy rate at 0.50% in an 8-1 vote, citing subdued wage growth and low oil prices. Officials said that "there would need to be a sustained firming in domestic cost pressures, compared with current rates" to move inflation up towards the BoE's 2% target. No matter where one turns there is no inflation and no inflation on the horizon except for guessing by some central banks, the Fed particularly continuing to believe it is coming. Crude oil down, commodities lower, some wage pressures but not much, global growth slow to flat or declining…China the poster boy for economic slowing. The long end of the yield curve is confirming that inflation is not in the picture for maybe a year or two, 10s and 30s holding well with low rates.
This week markets have had little to look at in terms of key economic measurements. Tomorrow though the report of the week, Nov retail sales expected +0.3% both with and without auto sales. Also tomorrow Nov PPI, expected 0.0% overall and +0.1% for the core (ex food and energy). U. of Michigan and Oct business inventories also released tomorrow.
Still a neutral outlook near term. The 10 yr note isn’t likely to break below its brick wall at 2.20% today so any movement will likely be small price declines rather than any significant improvement in MBS prices today.
Also at 8:30 Nov import and export prices; import prices were thought to be -0.8% were down just 0.4%, yr/yr import prices -9.4% up frm -10.5% in October. It was the fifth straight month, highlighting the drag on inflation from cheap oil, a strong dollar and slow overseas growth. Export prices expected -0.3% were down 0.6%, yr/yr -6.3% up frm -6.7% in October. No reaction to the report.
The stock market opened -13, NASDAQ and S&P -1. The 10 at 2.21% unchanged, MBS prices -3 bps frm yesterday’s close and +1 bp frm 9:30 yesterday.
This afternoon at 1:00 pm Treasury will complete this week’s borrowing with $13B of 30 yr bonds re-opening the Nov issue. Yesterday’s 10 yr auction was decent but not over-whelming. With the FF rate increase coming next week the demand for longer dated treasury debt has been good. The strong dollar contributing to good foreign demand. The dollar however has lost a lot of ground recently although still strong comparatively, the dollar has lost about $0.05 against the euro in the last couple of weeks with the ECB cutting rates while the Fed is expected to increase rates next week. Most European sovereign debt is rallying this morning, with yields at the 10-year maturity falling by 3-4 basis points in most countries. European government bonds have recovered the majority of their losses from the European Central Bank rate decision last Thursday.
The Bank of England held its main policy rate at 0.50% in an 8-1 vote, citing subdued wage growth and low oil prices. Officials said that "there would need to be a sustained firming in domestic cost pressures, compared with current rates" to move inflation up towards the BoE's 2% target. No matter where one turns there is no inflation and no inflation on the horizon except for guessing by some central banks, the Fed particularly continuing to believe it is coming. Crude oil down, commodities lower, some wage pressures but not much, global growth slow to flat or declining…China the poster boy for economic slowing. The long end of the yield curve is confirming that inflation is not in the picture for maybe a year or two, 10s and 30s holding well with low rates.
This week markets have had little to look at in terms of key economic measurements. Tomorrow though the report of the week, Nov retail sales expected +0.3% both with and without auto sales. Also tomorrow Nov PPI, expected 0.0% overall and +0.1% for the core (ex food and energy). U. of Michigan and Oct business inventories also released tomorrow.
Still a neutral outlook near term. The 10 yr note isn’t likely to break below its brick wall at 2.20% today so any movement will likely be small price declines rather than any significant improvement in MBS prices today.
