Early this morning the stock indexes were trading lower in the futures markets. The 10 yr note yield up 2 bp frm yesterday’s close, 30 yr MBSs at 8:00 AM +2 bp. At 8:30 weekly jobless claims were better than expected. Claims were down 27K to 341K, expectations were for claims to have declined about 6K. Claims for Connecticut and Illinois were estimated according to the Labor Dept. Last week’s claims were revised a little, from 366K to 368K. The four-week moving average, a less volatile measure than the weekly figures, rose to 352,500 last week from 351,000. The number of people continuing to receive jobless benefits declined 130,000 to 3.11 million in the week ended Feb. 2, the lowest level since July 2008. Although claims were better there was no noticeable reaction to the data in either the stock indexes or in the mortgage markets.
At 9:00 the 10 yr note yield, after increasing 2 bp earlier had declined to unchanged from yesterday, but the 10 yr today is the new 10 yr auctioned yesterday at 2.046%; at 9:00 down to 2.02%. Mortgage prices at 9:00 +12 bp, +5 bp frm 9:30 yesterday. At 9:30 the DJIA opened -55, NASDAQ -13, S&P -6; 10 yr note 2.03%, down frm 2.046% at yesterday’s auction. 30 yr MBSs better by 12 bp. (see below for 10:00 levels in stock indexes---improving already)
The only scheduled thing left today is the $16B 30 yr bond auction. So far this morning traded as the yield slightly lower than yesterday’s close, in pre-auction trading the 30 is yielding 3.20%, 3 bp lower than yesterday’s close. Yesterday the 10 yr auction was weak compared with last month’s auction and the averages over the last 12 months.
Europe’s stock markets weaker today, the US markets following lower. Data from Europe not encouraging; the euro-area economy shrank 0.6% in the final three months of 2012, the worst performance in almost four years, as output slumped in its three biggest economies. The bigger decline in claims this morning didn’t help the stock market. Is this the beginning of the long awaited correction; stocks ignoring bullish data? Maybe, maybe not; too early to make that call. Yesterday the DJIA declined 36 points, this morning opening down another . Yesterday wasn’t a wide sell-off in equity markets, the NASDAQ up 10 points and the S&P, the broadest index up 1 point. Although the stock market is weaker this morning there is no movement into treasuries; the 10 yr and mortgage markets are essentially unchanged, AND still hold a bearish bias. Yesterday the 10 traded at its highest yield since last April 10th.
Don’t try and beat the market. The 10 yr and mortgage markets still hold strong bearish technicals. Even the decline in Europe on lower growth data and the soft stock market this morning haven’t budged the 10; MBSs a little better but lenders continue to withhold gains. There is too much talk about a correction stocks that will rally the bond market. That will occur if there is continuous selling in equity markets but already this morning the key indexes are cutting their losses at the 9:30 open.
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