One of those days I can assure you that rates are going to either go up or go down...
FNMA 30-YR 4.5%
Previous close 101.094
Opened down 0.03bp @ 101.063
Economic Data:
EUR / USD 1.3544 Down 0.0087
USD / JPY 89.150 Up 0.1825
GBP / USD 1.4936 Down 0.0302
OIL 80.26 Up 0.06
Gold 1,117.30 Down 1.60
Key Economic News:
Three major releases to start the week, on spending, income, and the PCE price index, manufacturing conditions per the ISM's survey, and construction spending. Richmond Fed President Jeffrey Lacker will also speak on regulatory reform...
8:30: Personal income and outlays for Jan...moderate spending and income gains, small uptick in core index? Spending appears to have increased modestly despite a small setback in vehicle sales. We also expect to see a decent gain in income, with higher wages and longer workweeks providing an increase in labor income. The core PCE index is unlikely to be as weak as the core CPI; the -0.14% reported for the core CPI did get some benefit from a high weight on lodging away from home. That plus a shift in weight toward medical and away from housing costs should be enough to push this index up a few basis points.
On income...Median forecast (of 57): +0.4%, ranging from +0.2% to +0.6%; last +0.4%.
On spending, median forecast (of 62): +0.4%, ranging from +0.2% to +0.6%; last +0.2%.
On PCE core price index, median forecast (of 45): flat, ranging from -0.1% to +0.2%; last +0.7%.
9:45: Richmond Fed President Jeffrey Lacker speaks on regulatory reform...to the Institute of International Bankers' annual conference in Washington, DC. Mr. Lacker's next turn on the voting rotation of the FOMC is in 2012.
10:00: ISM manufacturing index for Feb...slight slowing? Regional surveys have been mixed, and the durable goods orders data were not as firm under the surface as they appeared overall. We therefore look for a modest slowing in the ISM's index of activity in the manufacturing sector.
Median forecast (of 64): 58, ranging from 55 to 60.1; last 58.4.
10:00: Construction outlays for Jan...look for another weak number. As we noted last month, most measures of activity in the residential sector have been quite soft. we expect this to show up in the residential component of construction outlays. the private, nonresidential component should also decline.
Median forecast (of 40): -0.6%, ranging from -1.8% to +0.3%; last -1.2%.
Advice:
Firm gain in spending; income better than it looks.
Spending posts firm gain in Jan, pointing to annualized growth of about 3% if not a bit more in Q1. Income is firmer than skinny 0.1% increase suggest as labor compensation +0.4%. Core price index flat, as commonly expected.
Key Numbers:
Personal spending +0.5% in Jan (mom, +3.5% yoy) vs median forecast +0.4%.
Personal income +0.1% in Jan (mom, +1.1% yoy) vs median forecast +0.4%.
PCE core price index +0.005% in Jan (mom, +1.4% yoy) vs median forecast flat.
If ISM and Construction outlays come out as expected at 10:00est. Even with gains in Spending and Income, I would expect the market to keep improving today.
I would float today.
My position on MBS has changed to long today (I'm a buyer).
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