Started better this morning in the bond and mortgage markets after the
10 yr note yield increased to 1.85% two days ago where strong support resides.
At 8:30 the 10 yr note traded at 1.78% down 3 bp with 30 yr FNMA MBS +12 bp.
Weekly jobless claims at 8:30 were expected to be up 16K, as reported claims
were right on, +17K to 361K. The four-week moving average of claims declined to
367,750, the lowest since the end of October, from 381,500 last week.
Continuing claims rose by 12,000 to 3.23 million in the week ended Dec. 8. The
continuing claims figure does not include the number of workers receiving
extended benefits under federal programs. Those who’ve used up their
traditional benefits and are now collecting emergency and extended payments
decreased by about 94,000 to 2.14 million in the week ended Dec. 1, the last
data available.
Q3 final GDP was expected to be unchanged from the preliminary
report last month at +2.7%. Growth in the quarter increased more than thought,
at +3.1%, a rather surprising increase. According to the Commerce Dept. the
increase was due to increased consumer spending and a smaller trade deficit.
There was little reaction to the better growth in the quarter, in a few days
the fourth quarter will be complete; it is highly unlikely Q4 will come close
to the growth in Q3. Slowing growth globally and companies reducing their
spending and hiring in the quarter caused by fiscal Cliff concerns may reduce
GDP growth in half frm Q3.
At 9:30 the DJIA opened +5, NASDAQ +5, S&P +1. The 10 yr note at 9:30
+5/32 at 1.79% -2 bp; 30 yr MBS price +9 bp.
Republicans in Congress will vote today on Boehner’s plan to raise
taxes on incomes over $1 million. The proposal is aimed at
preventing more than $600B of automatic tax increases and spending cuts from
coming into effect next year. White House officials told a group of industry
representatives that Obama’s budget talks with Boehner have deteriorated. The
vote is all about posturing; it may pass the House but that is as far as it
will get. Viewed on a day-to-day basis, today it looks bleak for a deal to
avoid the Cliff. Tomorrow is another day, and there is still next week. For all
the conjecturing and opinions, whether we avoid the Cliff is still highly
uncertain regardless of who is talking in Congress or the Administration.
Four economic reports at 10:00. Nov existing home sales
were thought to be up 2.3% to 4.90 mil annualized units; sales increased 5.9%
to 5.04 mil units. Yr/yr sales of existing home sales +14.5%, the 5.04 mil nits
is the largest since Nov 2009 which was due to the home owners tax credit. Take
that month out and sales are at highs not seen since 2007. There is now just a
4.8 month supply based on present sales. The Dec Philadelphia Fed business
index was expected at -2.0, as reported the index increased to +8.1, the best
since last April. Nov leading economic indicators was expected -0.2%, as
reported it was spot n at -0.2%. Finally, the Oct FHFA house price index was
expected +0.3%, the price index increased 0.5%.
Technically, we noted two days ago that 1.85% on the 10
yr note was strong support; so far it has held as expected. Rates should
improve more but we don’t expect much of an improvement. Suggest using any
improvements to lock in rates.
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