Thursday, 3/18/10 10:14 AM
Treasuries and mortgages opened slightly better this morning; the same kind of start that has been the case all week. At 8:25 the 10 yr note +3/32, mortgages +2/32 (.06 bp). At 8:30 two data points; weekly jobless claims were right on, down 5K to 457K with continuing claims increasing slightly to 4.579 mil frm 4.567 last week. The number of people continuing to receive jobless benefits increased by 12,000 to 4.58 million in the week ended March 6. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Today’s report showed the number of people who’ve used up their traditional benefits and are now collecting extended payments jumped by about 352,800 to 6.04 million in the week ended Feb. 27. Markets are taking the report as evidence that employers are ending their job firings as the economy improves; however new job creation will likely be anemic by any measurement as long as worker productivity remains high; Q4 productivity up a solid 6.9% with unit labor costs declining 5.9%. As long as employers can get more out of current workers new jobs will be slow to improve. Most economists are expecting unemployment to remain of 9.0% or more at year end.
Also at 8:30 Feb consumer price index was unchanged overall (+0.1 expected), the core rate excluding food and energy was on target, +0.1%. Yr/yr overall CPI +2.1% with the core yr/yr +1.3%; confirming inflation is very subdued. Yesterday's PPI was also subdued; with traders confident inflation will stay low the data on CPI today was a yawner as it adds confirmation to the low inflation outlook that the Fed and every other economist expects this year.
Treasuries and mortgages at 9:00 were struggling; the 10 yr note was off 2/32 and mortgages -1/32 (.03 bp) frm the close yesterday, the DJIA index +13 points. At 9:30 the DJIA opened +5, the 10 yr note -2/32 at 3.65% and mortgage prices -1/32 (.03 bp).
More data at 10:00; Feb leading economic indicators, expected to be up 0.1% after jumping 0.9% in Jan, was spot on at 0.1%, the 11th month in succession it has increased.
Also at 10:00, a few minutes ago; the Mar Philly Fed business index increased to 18.9 frm 17.6 in Feb, better than 18.0 expected. New orders component declined to 9.3 frm 22.7, prices pd at 38.6 frm 32.4 and employment slightly better at 8.4 frm 7.4 in Feb Any index red over zero is expansion. There was no reaction to the 10:00 data in either the stock market or the rate markets.
Not on the radar for traders but the Q4 current account balance was slightly better than expected, -$115.6B against estimates of -$119.3B. The current account is the measurement of all transactions in foreign trade and investments. The take away; $115B left the US to foreign countries, the current acc't has run deficits for many years so not much immediate concern with it. Furthermore, the US is likely destined to run current account deficits for years to come as we will import more than we export.
The CBO has apparently finished its cost review of the health care reform bill that was submitted to it. CBO estimates are a cost of $940B over 10 yrs and it will reduce the budget deficit by $130B over that period. The savings will come from higher taxes of course; increased payroll tax for Medicare, taxes on medical devises, and eventually tax increases on those Cadillac health care policies. Oh. and increases n insurance premiums. CBO is bi-partisan but cannot comment on any bill, it can only develop data based on what has been submitted. Never take at face value what Congress says about dollars; it is inevitable that whatever health care bill is finally passed it will eventually over-run cost estimates. Health care reform is necessary, the question is will a bill that is rammed through on parliamentary shenanigans.
PRICES @ 10:10 AM
10 yr note: 99.27 -1/32 3.64% unch
5 yr note: 99.31 -2/32 2.38% +2 BP
2 Yr note: 99.28 -1/32 0.94%+2 BP
30 yr bond: 100.31 +2/32 4.56% unch
Libor Rates: 1 mo 0.239%; 3 mo 0.271%; 6 mo 0.407%; 1 yr 0.856%
30 yr FNMA 4.5 Apr: @9:30 101.03 -1/32 (.03 bp) (+2/32 (.06 bp) frm 9:30 yesterday)
15 yr FNMA 4.0 Apr: @9:30 102.00 -1/32 (.03 bp) (+3/32 (.09 bp) frm 9:30 yesterday)
30 yr GNMA 4.5 Apr: @9:30 101.22 unch (+2/32 (.06 bp) frm 9:30 yesterday)
15 yr GNMA 4.0 Apr: @9:30 102.22 -1/32 (.03 bp) (+4/32 (.12 bp) frm 9:30 yesterday)
Dollar/Yen: 90.21 -0.14 yen
Dollar/Euro: $1.3676 -$0.0060 (dollar better)
Gold Apr: $1124.80 +$0.60
Crude Oil Apr: $82.50 -$0.43
Goldman-Sachs
Commodity Index: 530.55 -1.65
DJIA: 1074.48 +14.91
NASDAQ: 2386.93 -2.16
S&P 500: 1165.29 -0.92