The 10 yr and MBSs started a little weaker this morning; early trading in the stock indexes pointing to a slightly better open at 9:30. Neither market however was much different from yesterday’s closes. In Cyprus today, after being closed for two weeks, the banks opened for the first time. Yesterday most everyone was expecting the possibility of huge unruly crowds; lots of The bond and mortgage markets started the day a little weaker with security was planned as the world waited to see how citizens would react. Nothing happened, the opening of banks was very orderly with not many rushing to withdraw the maximum 300 euros per day. According to reports and video coverage the lines at banks were small, no more than 20 to 30 people lining up. “We expected much more people,” said a manager of a Bank of Cyprus branch. “Fortunately there are only some people who needed cash for the day, but customers reacted fantastically. We expected some people to be more aggravated.” The controls on withdrawals will continue for the next seven days.
The German 10 yr bund yield rose one basis point to 1.28% after declining to 1.25%, the lowest level since Aug. 3. The yield has dropped 10 basis points this week. Spain’s 10-year yield rose one basis point to 5.09%. The rate has risen 23 basis points this week. Italian bonds (10 yr) at 4.78% was down from 4.86% earlier today, the bond up 26 bp this week. German unemployment unexpectedly rose in March; the unemployed increased 13K in the month against forecasts of a decline of 2000. Europe’s stock market today were all better on relief there were no incidents in Cyprus when their banks opened.
8:30 data; weekly jobless claims were expected to be up 4K, as reported claims were up 16K to 357K and last week’s claims were revised up frm 336K to 341K. The 4 week average increased to 343K, up 2,250; continuing claims did decline to the lowest level since July 2008. The final Q4 GDP report was expected at +0.6%, growth was +0.4% after the preliminary data last month was a growth of 0.1%.
By 9:00 this morning the US stock indexes were losing all of the early improvement; the 10 yr note rate fell back to unchanged at 1.85% and 30 yr MBSs after opening down 8 bp were also back to unchanged. At 9:30 the DJIA opened +14, NASDAQ +2, S&P unch; 10 yr note +1 bp at 1.86%, 30 yr MBS price -6 bp frm yesterday’s close.
9:45 this morning brought the March Chicago purchasing mgrs. index; expected at 56.1 frm 56.8, the index fell to 52.4. Another measurement that suggests the economy may be slowing; the new orders component fell to 50 frm 60 on February. Consumer confidence slipped on Tuesday, the employment picture still too high. Would be employers and people overall are beginning to realize that Obama Care, originally touted as a cost cutting measure, will in fact cost businesses and individuals more---about $2K a year on average according recent data from American Actuaries’. Now that the reality is setting in, it is another drag on hiring full time workers.
Later today, at 1:00 Treasury will auction $29B of 7 yr notes. Yesterday the 5 yr auction went OK, about in line with demand for previous 5 yr auctions.
The recent decline in interest rates has been a safe haven event caused of course over the debt crisis in Cyprus. It is too early to call it over, but presently the 10 yr note , based on momentum oscillators and a key moving average, is registering overbought readings. When the 14 day relative strength indicator falls to present levels we expect some consolidation at best, at worst an increase in rates. The 10 is testing its 100 day average at 1.84%, it hasn’t traded below it since the beginning of the year.
The US stock market will be closed tomorrow for Good Friday although the bond and mortgage markets will trade.