Update:The MBS Market has turned negative in the last half hour. Bonds once again were turned away by the thick ceiling of resistance formed by the 50 day and 200 day moving averages. Since there is nothing on the horizon that could be forseen to boost them over that resistance and with an upcoming announcement of next weeks Treasury auctions my advice is to LOCK as it appears we may be hitting a high point in the market.
Here is today's Market Snapshot from RateAlert.com:
Treasuries and mortgages started generally unchanged this morning ahead of two economic releases, the stock market in early futures market trade were pointing to a weaker open at 9:30. The DJIA at 8:30 was off 39 points, the 10 yr unchanged and mortgage prices +1/32 (.03 bp). This week there has been no data points to focus on except Monday's Mar leading economic indicators that don't get a lot of attention. At 9:30 the DJIA opened -87; 10 yr note +3/32 3.73% -1 BP and mtgs +3/32 (.09 bp).
Greece debt problems are back roiling markets. New data out puts Greece's budget deficit at 13.6% of GDP and higher than what was thought, making a bailout more of a problem. Greece's benchmark 10-year bond yield rose to 8.49%, the highest since 1998 and more than twice the comparable German rate. The cost of insuring government debt against default climbed to a record today. Greece's widening deficit and questions about the accuracy of its economic data have undermined the credibility and enforcement of the EU's budget rules. Greece's shortfall last year was more than four times the EU limit, though it wasn't the region's biggest. Ireland's budget gap was revised up to 14.3%, the largest for any country since the start of the euro in 1999.
At 8:30 weekly jobless claims were spot on, down 24K to 456K new unemployment claims; continuing claims were slightly lower to 4.646 mil frm 4.686 mil last week. Also at 8:30 Mar producer price index, thought to be +0.5%, was up 0.7%. The core rate (ex food and energy) was right on estimates, up 0.1%; yr/yr the overall PPI +6.0% the core yr/yr +0.9%. PPI continues to support the view inflation isn't a factor so far----and in our view not a concern as businesses have no pricing power to increase prices. The Fed will continue to keep the FF rate low until there is evidence the economic recovery is on more solid footing and inflation remains a non-factor.
At 10:00, March existing home sales were expected to be up 4.5% to 5.25 mil units annualized, sales increased 6.8% to 5.35 mil. Single family sales were up 7.3% with 44% of the sales to first time homebuyers. The inventory of homes on the market increased 1.5% to an 8 month supply as banks continue to unload inventories of foreclosed properties onto the markets. There was no noticeable reaction to the report on stocks and bonds.
Pres. Obama will speak today in NY, lambasting the Wall Street firms and banks for trying to block financial reform that is being debated in Washington. "A free market was never meant to be a free license to take whatever you can get, however you can get it," Mr. Obama will say, according to speech excerpts released Wednesday night. "That is what happened too often in the years leading up to the crisis. Some on Wall Street forgot that behind every dollar traded or leveraged, there is family looking to buy a house, pay for an education, open a business, or save for retirement. What happens here has real consequences across our country." As he has done several times in the year-long debate, the president will implore industry executives to call back the lobbyists engaged in "furious efforts" to thwart or water down his legislation. "I am sure that many of those lobbyists work for some of you," he will say, according to the excerpts. "But I am here today because I want to urge you to join us, instead of fighting us in this effort. I am here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of our financial sector."
The main fight on financial reform is focused on regulating the derivatives markets, one key reason the system almost broke down completely. Legislation being debated is focused on how to regulate trading and make it more transparent on derivatives of all types. In our view derivatives (credit default swaps, interest rate swaps and other synthetic devises) that led to extreme leverage that The Street itself didn't understand, should to be traded on an exchange and with a clearinghouse in the middle. Big banks and Wall Street firms want to thwart it because that kind of control would eliminate much of the leverage used by the firms that about sunk this country, and would limit the types of swaps and derivatives that could be created. Big banks and financial firms want to continue operating without transparency as they have for generations. Since they have proven they can't control themselves it is time to shine a bright light on what they do under the radar, not to say everything done in the derivatives markets is bad; there are good reasons to use various derivatives, but transparency should be increased.
Stocks being hit this morning on the Greece problems and some concerns about Obama's speech coming up.