Yesterday interest rates increased, today starting a little better as the bond and mortgage markets remain in tight ranges. While the technicals continue to hold bearish biases there is nothing out there now that is likely to drive interest rates in either direction. The debt ceiling debates, the gridlock in Washington, and mixed signals on the status of the economy and its future are keeping markets in check. The take away now is that rates are unlikely to decline or increase much after the recent increases.
This morning the stock index futures were generally unchanged after being slightly weaker very early; the DJIA at 9:00 +9, NASDAQ -6, S&P +1. The 10 yr +7/32 at 1.86% -2 bp; 30 yr MBSs at 9:00 +18 bp after declining 48 bp yesterday. At 9:30 the DJIA opened +12, NASDAQ -6, S&P +1; 10 yr note 1.86% -2 b and 30 yr MBSs +10 bp.
The only economic measurement today; the U. of Michigan consumer sentiment index at 9:55 was expected to have declined to 75.0 frm 80.5 mid-month and 72.9 at the end of Dec. The index at 71.3, a big miss; the lowest since Dec 2011. The lower index due to the Cliff anxiety and tax increases. There was a minor decline in US indexes but the 10 yr note yield held at 1.86% -2 b frm yesterday with 30 yr MBSs improving 7 bp frm 9:30 levels.
Scanning the news this morning, there isn’t anything that is significant. Now that the U.of Michigan consumer sentiment index is out there isn’t anything on the schedule today that could move markets much. The rest of the day will likely be quiet with traders reducing some of their positions ahead of the three day weekend. All markets will be closed on Monday to celebrate MLK’s birthday. The next scheduled data is next Tuesday with Dec existing home sales. Dec starts exploded +12.1% reported yesterday. The housing market is continuing to improve, housing one of the bright spots for the economy; low mortgage rates and values seen as good, driving housing to some of the best reads in five years.
China’s economy is continuing to grow; 2012 Q4 GDP 7.9% better than Q4 2011, about in line with estimates and up frm +7.4 in yr/yr Q3. Europe’s economies still struggling except for Germany. The global economic outlook is currently seen as improving, even a little in Europe as its debt crisis has ebbed in recent months. UK retail sales were expected up 0.2%, as reported sales declined 0.1%. Stock markets in Europe have been improving along with US stocks; the US indexes at 5 yr highs. Time for a pullback in the stock markets? Although the indexes continue to improve we note there are increasing numbers of stock analysts now talking that the markets may have advanced a little too much based on economic outlooks. If US equity markets do contract the bond and mortgage markets will benefit, providing an opportunity for slightly lower interest rates.
No change in the technical pictures in the bond and mortgage markets; bot markets continue to demonstrate bearish technical patterns.
Comments (1)Subscribe to CommentsComment