Market commentary

There are no official economic releases today. Japan, Libya and oil prices remain in the headlines and are the drivers of both stock and bond markets. The 10-year Treasury, after retracing some of the recent improvement from earlier in the week, has settled back at 3.25% for the time being. This is 25 bps in yield below where it closed two weeks ago.

And just when you thought we may get a break at the pump (meaning gasoline prices) the U.N. Security Council approved a resolution authorizing military action, to enforce a no-fly zone over Libya. Oil prices have spiked above $103/bbl this morning in New York trading.

The Senate passed the three-week continuing resolution to fund the government when the current resolution expires today. The bill will now go to the White House for the President’s signature. The resolution funds the government through April 8 and makes another $6 billion in cuts.

Mortgage prices are flat from Thursday’s close.

Market commentary

Consumer prices rose slightly more than expected in February with headline CPI increasing 0.5% month over month and 2.1% year over year. The biggest movers were the volatile food and energy components, so ex-food and energy, CPI rose 0.2% month over month and 2.1% year over year. While higher commodity prices and energy prices are filtering through to consumer prices, the Fed believes their impact will be “transitory.” I guess we will see.

Again today, the markets are focused on the unfolding events in Japan. Although the reaction today is the exact opposite of Wednesday. Wednesday we saw a flight to safety bid in treasuries as the yield on the 10 year note fell from 3.34% to as low as 3.14%. This morning the 10 year note yield has risen to 3.26% as we seek stock markets rebound. Mortgage prices are worse by .375% to .50%.

Market commentary

The headlines continue to focus on tragic events in Japan and the continued unrest in the Middle East, almost ignoring the U.S. economic data. Under normal circumstances the rise of 1.6% month over month in the Producer Price Index would have driven interest rates much higher. Excluding food and energy the core index rose 0.5% versus the expected 0.2%.

After closing well of the high prices Tuesday, U.S Treasuries are rallying again this morning as the flight to safety continues.

Market commentary

The Fed meets today and is scheduled to release their official statement at 2:15 p.m. ET. They are expected to make no changes to current policy, leaving the overnight rate unchanged and continuing the QE2 Treasury purchase program. Not that the Committee was wavering, but the events in Japan will likely give them more cover in leaving monetary policy accommodative.

The markets are now intensely focused on the possibilities of a nuclear disaster in Japan as $364 billion worth of wealth was lost from the Japanese stock market overnight. The U.S. stock markets opened broadly lower and treasuries were the recipients of a flight to quality bid.

Three hours into the U.S. trading day stock markets are finding support and some of the bid is exiting the bond market. Early this morning the yield on the 10 year note had fallen to 3.23% and is now trading at 3.29%. It is hard to know how events will play out in Japan and the Middle East so take advantage of the opportunity the market has given you today.

Market commentary

For the past few weeks the markets have focused on the unrest in the Middle East and North Africa, however, the global community is now focused on the disaster in Japan and the quickly unfolding events. As a result, the U.S. Treasury market is the recipient of a flight to quality bid with the yield on the 10 year note falling to 3.34%.

In addition to the above, we have a full economic calendar this week, beginning tomorrow with the FOMC meeting and the accompanying rate decision. Inflation data will come later in the week in the form of the Producer and Consumer Price Indices and Leading Indicators.

For today mortgage prices are improved by approximately .375% from the close on Friday.

Market commentary

Once again world events dwarfed U.S. economic data. Retail Sales in the U.S. rose 1.0% in February, as expected, however, the massive earthquake that hit Japan and events in the Middle East continue to grab headlines.

Stock markets and commodities sold of sharply after news of the Japanese earthquake, and so far the “Day of Rage” in Saudi Arabia has not materialized into anything of substance.

An initial flight to safety into the U.S. Treasury market has faded with the yield on the 10 year note rising from 3.36% to 3.395%. Mortgage prices are worse by .125% to .25%.

Market commentary

This morning’s report that Initial jobless claims rose from 371k to 397k for the week ending March 5, and the four-week moving average rose slightly to 392k had no effect on the markets. What did have an effect was Moody’s downgrade of Spain’s sovereign debt, and weaker than expected economic data from China. Couple these items with the continued unrest in Libya and the Middle East and you have a scenario where the markets have a variety of crises on which to focus.

Since the downgrade of Spanish debt and weaker than expected growth from Chine are the new kids on the block for today, this has become the focus. U.S. stock markets are in sell mode with the DOW lower by 180 points. Any potential flight to quality rally in U.S. Treasuries is muted with the yield on the 10 year note lower by a couple of basis points.

The good news is oil and energy prices are falling sharply on the perception that global economic growth is slowing.

We saw a nice rally in bonds on Wednesday on surprising demand at the 10 year note auction. We will see if this can be repeated today as the Treasury auctions $13 billion of 30 year bonds.