A slight bounce on Friday after the April and March jobs data, but as noted Friday afternoon it didn’t hold. The 10 dropped to 2.10% on the reaction Friday morning but at the end of the day at 2.15% down just 3 bps. 30 yr MBS FNMA jumped 41 bps on the employment data but ended a little lower at +33 bps. We noted Friday that the trade was not positive although a little better, this morning in early trading the 10 up 4 bps to 2.19% and 30 yr MBS price at 9:00 -17 bps.
There are no scheduled data today but later this week April data will get a lot attention, the first month that economists, traders and investors can excuse weather for any weakness in various data points. News over the weekend, China cut base lending rates again, the third time in six months. The cut designed to help state-owned businesses that are choking on debt and dragging growth down. The cut isn’t likely to help small businesses that China is counting on for sustainable growth. Recently China lowered bank reserve requirements to help small businesses. Why should US markets care? Because China can influence the outlook for the US economic growth. The German finance minister said a referendum in Greece on the country’s international bailout program may be a good idea, a very risky idea as previously Angela Merkel in the past that a vote would automatically be a vote on whether or not Greece would stay in the euro-zone. Why should US markets care? Because the Greek debt issues may have a huge impact for all of the EU if other debt reddened countries decide to renege on debts owed to the IMF and Europe’s banks could send the region back into deep recession. Meetings return in Brussels today.
At 9:30 the DJIA opened +2, NASDAQ +11, S&P +1; 10 yr 2.19% +4 bp and 30 yr MBS price -20 bps frm Friday’s close and -28 bp frm 9:30 Friday).
Last Wednesday and Thursday the bellwether 10 yr, leader of MBS movement, ran to 2.25% the high of the year and matching the high in early March prior the rate decline. It’s a double top in the rate level; will it hold? Will yields back down after the swift increase in rates hear and lead by Germany’s 10 yr bund? The simple answer, its data dependent; increasing optimism of global growth is anathema for fixed income investments, obviously weaker outlooks will keep the Fed and other global central banks from worrying too much about inflation and increasing rates.
Still bearish; all our work remains negative. Possibly markets may be starting a new range for treasuries and MBSs; for the 10 2.25% to 2.00%; MBS price frm 102.64 to 100.45. After the spike higher in rates the last two weeks we would like to see a consolidation, the relationship between price (or yield) and time is important now.
This week’s Calendar:
Tuesday,
10:00 March JOLTS job openings (5.158mil frm 5.133mil in Feb) (still March data)
1:00 pm $24B 3 yr note auction
2:00 pm April Treasury budget (+$153B)
Wednesday,
7:00 am weekly MBA mortgage applications
8:30 am April retail sales (+0.2%, down frm +0.9% in March; ex auto sales +0.5%)
April export and imp[ort prices (exports +0.1%, imports +0.4%)
10:00 am March business inventories (+0.2%)
1:00 pm $24B 10 yr note auction, a new 10 yr
Thursday,
8:30 am weekly jobless claims (+11K to 276K)
April PPI (+0.2%, ex food and energy +0.1%)
1:00 pm $16B 30 yr bond auction, a new 30 yr
Friday,
8:30 am Empire State manufacturing index (5.0 frm -1.2)
9:15 am April industrial production (0.0% frm -0.6% in March; manufacturing +0.2%)
April factory use (78.4% unch frm March)
10:00 am U. of Michigan consumer sentiment ndex (95.8 frm 95.9 at the end of April)
PRICES @ 10:10 AM
10 yr note: -11/32 (34 bp) 2.19% +4 bp
5 yr note: -5/32 (15 bp) 1.52% +3 bp
2 Yr note: -1/32 (3 bp) 0.58% unch
30 yr bond: -31/32 (97 bp) 2.95% +5 bp
Libor Rates: 1 mo 0.184%; 3 mo 0.279%; 6 mo 0.414%; 1 yr 0.732%
30 yr FNMA 3.0 May: @9:30 101.25 -20 bp (-28 bp frm 9:30 Friday)
15 yr FNMA 3.0 May: @9:30 104.41 -10 bb (-29 bp frm 9:30 Friday)
30 yr GNMA 3.0 May: @9:30 102.44 -13 bp (-21 bp frm 9:30 Friday)
Dollar/Yen: 119.91 +0.15 yen
Dollar/Euro: $1.1155 -$0.0044
Gold: $1189.70 +$0.80
Crude Oil: $59.63 +$0.24
DJIA: 18,183.87 -7.24
NASDAQ: 5015.04 +11.49
S&P 500: 2116.90 +0.80
There are no scheduled data today but later this week April data will get a lot attention, the first month that economists, traders and investors can excuse weather for any weakness in various data points. News over the weekend, China cut base lending rates again, the third time in six months. The cut designed to help state-owned businesses that are choking on debt and dragging growth down. The cut isn’t likely to help small businesses that China is counting on for sustainable growth. Recently China lowered bank reserve requirements to help small businesses. Why should US markets care? Because China can influence the outlook for the US economic growth. The German finance minister said a referendum in Greece on the country’s international bailout program may be a good idea, a very risky idea as previously Angela Merkel in the past that a vote would automatically be a vote on whether or not Greece would stay in the euro-zone. Why should US markets care? Because the Greek debt issues may have a huge impact for all of the EU if other debt reddened countries decide to renege on debts owed to the IMF and Europe’s banks could send the region back into deep recession. Meetings return in Brussels today.
At 9:30 the DJIA opened +2, NASDAQ +11, S&P +1; 10 yr 2.19% +4 bp and 30 yr MBS price -20 bps frm Friday’s close and -28 bp frm 9:30 Friday).
Last Wednesday and Thursday the bellwether 10 yr, leader of MBS movement, ran to 2.25% the high of the year and matching the high in early March prior the rate decline. It’s a double top in the rate level; will it hold? Will yields back down after the swift increase in rates hear and lead by Germany’s 10 yr bund? The simple answer, its data dependent; increasing optimism of global growth is anathema for fixed income investments, obviously weaker outlooks will keep the Fed and other global central banks from worrying too much about inflation and increasing rates.
Still bearish; all our work remains negative. Possibly markets may be starting a new range for treasuries and MBSs; for the 10 2.25% to 2.00%; MBS price frm 102.64 to 100.45. After the spike higher in rates the last two weeks we would like to see a consolidation, the relationship between price (or yield) and time is important now.
This week’s Calendar:
Tuesday,
10:00 March JOLTS job openings (5.158mil frm 5.133mil in Feb) (still March data)
1:00 pm $24B 3 yr note auction
2:00 pm April Treasury budget (+$153B)
Wednesday,
7:00 am weekly MBA mortgage applications
8:30 am April retail sales (+0.2%, down frm +0.9% in March; ex auto sales +0.5%)
April export and imp[ort prices (exports +0.1%, imports +0.4%)
10:00 am March business inventories (+0.2%)
1:00 pm $24B 10 yr note auction, a new 10 yr
Thursday,
8:30 am weekly jobless claims (+11K to 276K)
April PPI (+0.2%, ex food and energy +0.1%)
1:00 pm $16B 30 yr bond auction, a new 30 yr
Friday,
8:30 am Empire State manufacturing index (5.0 frm -1.2)
9:15 am April industrial production (0.0% frm -0.6% in March; manufacturing +0.2%)
April factory use (78.4% unch frm March)
10:00 am U. of Michigan consumer sentiment ndex (95.8 frm 95.9 at the end of April)
PRICES @ 10:10 AM
10 yr note: -11/32 (34 bp) 2.19% +4 bp
5 yr note: -5/32 (15 bp) 1.52% +3 bp
2 Yr note: -1/32 (3 bp) 0.58% unch
30 yr bond: -31/32 (97 bp) 2.95% +5 bp
Libor Rates: 1 mo 0.184%; 3 mo 0.279%; 6 mo 0.414%; 1 yr 0.732%
30 yr FNMA 3.0 May: @9:30 101.25 -20 bp (-28 bp frm 9:30 Friday)
15 yr FNMA 3.0 May: @9:30 104.41 -10 bb (-29 bp frm 9:30 Friday)
30 yr GNMA 3.0 May: @9:30 102.44 -13 bp (-21 bp frm 9:30 Friday)
Dollar/Yen: 119.91 +0.15 yen
Dollar/Euro: $1.1155 -$0.0044
Gold: $1189.70 +$0.80
Crude Oil: $59.63 +$0.24
DJIA: 18,183.87 -7.24
NASDAQ: 5015.04 +11.49
S&P 500: 2116.90 +0.80
