Market commentary

Bonds sold off on Wednesday and are slightly worse in price again this morning. The yield on the 10 year note traded as low as 2.47% on Tuesday, and this morning it stands at 2.54%.

Economic data today was a non-event with second quarter GDP being revised upward 0.1% to an 1.7% annualized pace while personal consumption was revised up to 2.2% growth from the previously reported 2.0%. Initial jobless claims fell slightly last week, but remain at elevated levels.

Friday morning we will see another report on consumer confidence as well as data on the health of the manufacturing sector of the U.S. economy.

Mortgage prices are .250% to .375% worse than Wednesday morning.

Market commentary

Today has a light economic calendar, with the Mortgage Bankers Association reporting that mortgage applications dropped 0.8% for the week, however, applications for new purchases rose 2.3%. Later today the U.S. Treasury will auction $29 billion of 7 year notes, following Monday’s auction of 2 year notes and Tuesday’s auction of 5 year notes. The 2 year and 5 year note auctions went off extremely well, providing tough acts to follow for today’s 7 year note auction.

Bond prices are taking a breather after the early week rally pushed the yield on the 10 year note below 2.50%. Mortgage prices are .15% to .20% worse than Tuesday.

Market commentary

Treasury auctioned $36B 2-year notes yesterday and had excellent results. The auction stopped below the 1pm bid side of the market and the 3.78 bid/cover ratio was the best since 2007. The bond markets remained firm throughout Monday and are improving again this morning as the Conference Board reported its index of consumer confidence declined to 48.5, lower from 53.2 the prior month and less than the expected reading of 52.1.

The S&P/Case-Shiller index of property values reflected an increase of 3.2% from this time last year, giving homeowners some hope of a stabilization in prices.

Treasury is scheduled to auction $35B in new 5-year notes this afternoon, so we may see some volatility depending on how well the auction is received.

Market commentary

The Commerce Department reported durable goods orders surged in August, topping analysts’ estimates, and over-riding the disappointing new home sales data. U.S. stock indices are sharply higher on the durable goods data, with bond prices falling for a second day. There is additional pressure on the U.S. Treasuries as the market positions itself for next weeks’ auctions. The Treasury will auction $36 billion of 2 year notes, $35 billion of 5 year notes and $29 billion of 7 year notes.

This morning mortgage prices are .250% to .375% worse than the close on Thursday.

Market commentary

Initial jobless claims unexpectedly ticked higher this morning coming in at 465k for the previous week. Continuing claims were also slightly above estimates and the previous week’s releases of both measures were revised higher, indicating job growth remains anemic.

Two pieces of positive economic data came later in the morning with existing home sales in August rising 7.60% and Leading Economic Indicators posting an increase of 0.3%.

Bond prices rallied early on the report of increasing jobless claims, but have since pulled back with mortgage prices slightly worse than the close on Wednesday.

The Fed will be buying Treasuries in the 5 year range today as they continue to reinvest the cash flows from their MBS portfolio.

Market commentary

Treasuries rallied strongly following the release of the FOMC statement yesterday in which the Fed clearly acknowledged their concern about the economy and a lack of inflation but stopped short of taking action, yet. The 10-year Treasury traded at 2.70% just before the release and dropped shortly thereafter to 2.57%.

This morning the Mortgage Bankers Association stated mortgage applications fell 1.4% last week and applications for new purchases (excludes refinances) were down 3.3%. The pace of new purchase applications continues to be very low, the lowest they have seen since 1997.

The Treasury market is improving again this morning and mortgage pricing is better by .125% to .250%.

Market commentary

Housing starts were released this morning showing an increase of 57k (+10.5%) from July to August to a seasonally adjusted rate of 598k. This is a reasonable increase in starts but is still at a very low level, indicating housing remains in the doldrums.

The Fed is meeting today and will issue their FOMC statement at 2:15 p.m. ET. The running debate today is whether the Fed will embark on more quantitative easing. The recent bits of better economic data does give them some cover to delay action, but keep in mind we remain in uncharted territory, economically speaking.

Stock and bond markets put in a nice rally on Monday, and bond prices are improved again this morning. Mortgage prices are better by .125% to .250%.

Market commentary

This morning’s August CPI report came in a bit lower that expected, however, overall CPI rose 0.3% for the month and 1.1% year-over-year. The core CPI, which excludes food and energy, was unchanged in August and up a mere 0.9% year-over-year. It was the fifth straight month of sub 1% YOY increases and continued to tie the lowest YOY level since the early 1960`s. Bonds are nicely higher this morning, more than reversing yesterday’s sell-off on the long-end of the curve.
In addition to the CPI report, Reuters/University of Michigan reported its preliminary index of consumer sentiment fell to 66.6 from 68.9 in August. This month’s reading was less than the most pessimistic forecast in a Bloomberg News survey and has helped support the bond market. Mortgage pricing is approximately .125% better than the close on Thursday.

Market commentary

The producer price index increased 0.4%, the most in five months and twice the gain in July, according to Labor Department figures released this morning. Excluding the food and energy components the core index rose 0.3%, higher than the 0.1% forecast.
Initial jobless claims dropped by 3000 last week to 450,000, lower than the forecast of 459,000. While the pace of staff reductions has slowed, it is job creation that is needed to get the economy out of its slump.
Interestingly both stock and bond markets are reacting negatively to this morning’s data. U.S. stock indices are slightly lower; however, bonds are taking a beating with the yield on the 10 year note climbing back to 2.77%. This is on top of Wednesday’s drubbing, which has mortgage prices worse .50% to .625% from early Wednesday postings.

Market commentary

U.S. industrial output rose 0.2% in August, a slower pace that had been forecast. And the mortgage applications index declined 8.9% in the week ended September 10 and interest rates rose slightly from record lows.

The reaction in the markets is fairly muted with U.S. stock indices slightly higher and bond prices falling. Pricing for mortgage loans is flat to worse by .125%.

Market commentary

Monday’s bond market rally is continuing this morning with the yield on the 10 year note falling to 2.69% after hitting 2.84% on Friday. The August retail sales report was slightly better than expected as sales rose 0.4%, the second straight month of modest gains.

We have a full economic calendar the remainder of the week with Industrial Production, the Producer Price Index the Consumer Price Index and Consumer Confidence. As we have seen the past few days, expect continued volatility as the markets to trade on the data.

Mortgage prices have improved by approximately .25% this morning.

Market commentary

Bank stocks are driving equity markets higher today as a weekend meeting of world financial regulators gave large banks more time than had been expected to increase their capital. This rally in stocks may be short lived; however, as according to a WSJ survey of economists, optimism about the recovery is waning. Three in 5 economists surveyed said they expect that the Fed will eventually embark on additional quantitative easing. This comes on the same weekend that Goldman and Pimco both made headlines with their calls that the Fed will begin a second round of easing by Q1 of 2011. While economists believe this would be the wrong thing to do, clearly these folks are not confident in a continued U.S. economic recovery.

Bonds have improved slightly this morning with mortgage pricing better by approximately .125%.

Market commentary

Yesterday saw the convergence of a lower trade deficit, better jobless claims report, and a weak 30-year auction which pushed Treasury yields higher. The 10-year sold off almost 10 bps on the day to close at 2.76% and has opened weaker again this morning currently at 2.79%. Mortgage prices are worse by .250% to .50%.

Market commentary

A successful 10 year note auction on Wednesday lifted bond prices into the market close. This morning we see a reversal of that, with bond prices lower across the curve as initial jobless claims dropped from the 478,000 to 451,000, a positive sign for the job market.

Later today the U.S. Treasury will be auctioning $13 billion of 30 year bonds, which is expected to be well received. As of now the price for 30 year bonds is lower by over 1.00% and mortgage prices are worse by .25% to .375%.

Market commentary

The much anticipated release of employment figures came in stronger than expected this morning with slightly better numbers for August with notable revisions to June and July. The headline change in non-farm payrolls showed a loss of 54k jobs in August but a gain of 67k private payrolls. The headline drop still reflects the loss of temporarily hired census workers. June and July were collectively revised from a 351k loss to a 229k loss. Average hourly earnings were 0.3% higher and the average weekly hours were unchanged at 34.2.

The bond market immediately sold off on the higher than expected gain in private payrolls. The yield on the 10 year note spiked from 2.63% to 2.74% and mortgage bonds worsened in price over .50%. The markets have calmed slightly since the data, with the yield on the 10 year note falling back to 2.71% and mortgage bonds worse by .25% to .375%. Keep in mind many senior staff on the trading desks are on vacation in front of the Labor Day Holiday and volume is light.

Next week is light in terms of economic data; however, the U.S. Treasury will be auctioning 3yr and 10 yr notes and 30 yr bonds.

Enjoy you long, three day weekend!

Market commentary

The clarification of the Fed’s position on Quantitative Easing and the health of the economy (via their minutes and Bernanke’s statement from Jackson Hole) exposed Treasuries to the economic data with less support than they had just a week ago. Sure enough, the ISM report of manufacturing activity was stronger-than-expected yesterday sparking a rally in stocks and barrage of selling in bonds.

This morning new claims for unemployment benefits were reported as falling slightly last week, however, continuing claims remain at elevated levels. In addition to this report, worker productivity in the second quarter fell 1.8% while unit labor costs rose 1.1%. The Fed takes a keen interest in labor costs as these costs are a key measure of inflation.

The result of this weak data is unexpected as investors continue to sell bonds, driving the yield on the 10 year note back to 2.63%. Mortgage pricing is worse again by approximately .125% to .250%.

As usual, the first Friday of each month, the Labor Department releases the jobs data for the previous month. Tomorrow’s release is expected to show the labor market lost 100,000 jobs, while private sector hiring increased 41,000. The unemployment rate is forecast to rise from 9.50% to 9.60%.

Market commentary

The early releases this morning were mixed with ADP showing a slight decline in private payrolls of 10,000 for August while the Challenger Job Cut Announcements report showed the fewest corporate layoff announcements since June 2000. For August, Challenger shows 34,768 announced layoffs versus an average of 107,000 for all of 2009. Mortgage applications were up 2.7% for the week with purchase applications rising 1.8% according to the Mortgage Bankers Association.

The main data today was the ISM Manufacturing Index. This data was a huge surprise, jumping to 61.5 from 57.5. Expectations were for a dip to 55.3. In fact, given the fact that several of the regional surveys came up short recently, expectations may have been for a small miss to the downside.