Wednesday, 3/10/10 10:12 AM
The back and forth trading continues today; up one day, down the next is the character of this market recently. The 10 yr note down 5/32 at 9:00, mortgage prices unchanged and the DJIA and other key indexes unchanged. At 9:30 the DJIA opened +5, the 10 yr -7/32 at 3.73% +3 BP and mortgages -2/32 (.06 bp).
Another day with nothing but making any news story seem like the end all; got to have a reason to trade today. This week has had no fresh reports on the economy and today won't be any different. Jan wholesale inventories and Treasury Feb budget statement. The total focus, as is the case these days, will be on how equity markets trade and the demand for the $21B 10 yr note auction at 1:00. Almost a sure bet for traders these days; if equity markets rally sell treasuries, if equity markets falter buy treasuries. The chop has kept interest rates well contained in a narrow range with the mortgage markets holding like a rock so far. Scanning all the news wires we can't find anything of substance that markets will deal with today (so far).
Its over for Greece according to former European Commission President Romano Prodi. “For Greece, the problem is completely over,” said Prodi. “I don’t see any other case now in Europe. I don’t think there is any reason to think the euro system will collapse or will suffer greatly because of Greece.” Meanwhile back at the office; a Bloomberg survey is saying confidence in the world economy dropped for a second month in March amid concern the fallout from Greece’s budget crisis will undermine the global recovery. Take your pick as to the real story. The euro currency has fallen against the dollar this year on concerns Europe's secondary economies are shaky with excessive debt; Moody's and S&P are considering lowering the credit rating for Greece. Why do we talk about it? Because the debt issues in Europe led by Greece has been a sporting factor to US interest rates on some safe haven moves into safe US treasuries.
The MBA today released its Weekly Mortgage Applications Survey for the week ending March 5, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 0.5% from one week earlier. The Refinance Index decreased 1.5% the previous week and the Purchase Index increased 5.7% from one week earlier. The unadjusted Purchase Index increased 7.2% compared with the previous week and was 10.7% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 0.8%. The refinance share of mortgage activity decreased to 67.2% of total applications from 69.1% the previous week. The refinance share is at its lowest level since it was 66.1% in October 2009. The adjustable-rate mortgage (ARM) share of activity increased to 5.1% from 4.8% of total applications from the previous week. This is the highest ARM share since November 2009 when it was 5.3%. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.01% from 4.95%, with points decreasing to 0.82 from 0.99 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.32% from 4.27%, with points decreasing to 0.88 from 1.36 (including the origination fee) for 80% loans. The average contract interest rate for one-year ARMs increased to 6.80% from 6.77%, with points increasing to 0.30 from 0.29 (including the origination fee) for 80% LTV loans.
At 10:00 Jan wholesale inventories were expected to be up 0.2%, inventories declined 0.2%. Sales were up 1.3% with the inventory to sales ratio at 1.10 months, down from 1.12 months in Dec. NO reaction to the report in either interest rates or the equity markets.
At 1:00 the second of three Treasury borrowing binges with $21B of 10 yr notes up. Demand for US debt remains very strong, yesterday's 3 yr note saw very good demand and today's 10 yr is also expected to go well. Treasury is borrowing $192B in 2s through 30s each month to fund the expanding federal deficit. Later this afternoon Treasury will report the deficit in Feb, expected to be $222B.
PRICES @ 10:10 AM
10 yr note: 99.03 -8/32 3.73% +3 BP
5 yr note: 100.00 -5/32 2.37% +3 BP
2 Yr note: 99.30 -1/32 0.90% +2 BP
30 yr bond: 98.24 -11/32 4.70% +2 BP
Libor Rates: 1 mo 0.230%; 3 mo 0.255%; 6 mo 0.394%; 1 yr 0.857%
30 yr FNMA 4.5 Apr: @9:30 100.31-2/32 (.06 bp) (unch frm 9:30 yesterday)
15 yr FNMA 4.0 Apr: @9:30 101.28 -2/32 (.06 bp) (+1/32 (.03 bp) frm 9:30 yesterday)
30 yr GNMA 4.5 Apr: @9:30 101.15 -3/32 (.09 bp) (+3/32 (.09 bp) frm 9:30 yesterday)
15 yr GNMA 4.0 Apr: @9:30 102.18 -3/32 (.09 bp) (unch frm 9:30 yesterday)
Dollar/Yen: 90.69 +0.77 yen
Dollar/Euro: $1.3615 +$0.0020
Gold Apr: $1123.20 +$0.90
Crude Oil Apr: $81.32 -$0.17
Goldman-Sachs
Commodity Index: 524.57 -0.59
DJIA: 10576.40 +12.02
NASDAQ: 2350.51 +9.83
S&P 500: 1143.94 +3.49