|Kind of a quiet start this morning for treasuries and MBSs; stock indexes also traded generally unchanged early on today. The weekly MBA mortgage applications were much better for a change; the overall apps increased 9.5% from last week, purchases increased 5.0% while re-finances increased 12.0%. Lower rates always get the job done, the conforming rate according to MBA at 3.90%. Yr/yr purchases are up 3.0%.
Feb durable goods orders were thought to be up 0.7%, as released orders dropped 1.4%.Excluding the volatile transportation orders, expected up 0.3% but reported down 0.4%. Jan orders originally reported at +2.8% were revised lower to 2.0%. Yr/yr orders are up 0.6%; yr/yr ex transportation orders +2.3%. In Jan yr/yr orders 5.4%, ex transportation +4.5%. Motor vehicles slipped 0.5%, nondefense aircraft decreased 8.9%, and defense aircraft fell 33.1%. The latest orders numbers point to continuing weakness in the manufacturing sector and may soften Fed hawk rhetoric-especially taking into account the latest sluggish March manufacturing surveys. The strong dollar is taking its toll on US companies.
Talks are continuing with Iran to curtail nuclear programs. In exchange for stepping away from nuke development the five countries involved in the discussions would allow Iran to begin exporting oil it has been hoarding, unable to sell it. While trusting Iran is foolish, nevertheless more oil put on the markets will continue to depress prices.
The yield on German 10-year bonds fell two basis points, or 0.02 percentage point, to 0.22% as of 12:25 am in London. It had risen 5 basis points in the past two days. The yield dropped to 0.168 percent, a record low, on March 20.
The DJIA opened +30 at 9:30, NASDAQ +12, S&P +5. 10 yr at 9:30 unchanged at 1.87%; 30 yr MBS price +6 bps from yesterday’s close and +33 bps from 9:30 yesterday. (did your lenders pass on the price gains from yesterday morning?) Lenders are being conservative with this rally. By 10:00 stock indexes were trading negative.
This afternoon Treasury will auction $35B of 5 yr notes; yesterday’s 2 yr was OK but not outstanding.
Nothing has changed for us; all of our work remains bullish for the 10 yr and MBS markets. We continue to float and have accumulated nice price gains since last Wednesday. Volatility in the bond market has slowed somewhat this week, a welcome change. Although we expect interest rates to continue to decline in the near term, at these low levels and with the Fed apparently poised to begin tightening uncertainty is still lurking behind the scene so in terms of short term trading for those that can profit from small moves we can’t relax.
PRICES @ 10:00 AM
10 yr note: -2/32 (6 bp) 1.88% +1 bp
5 yr note: -2/32 (6 bp) 1.37% +1 bp
2 Yr note: unch 1.59% -1 bp frm yesterday’s 2 yr auction
30 yr bond: -1/32 (3 bp) 2.47% unch
Libor Rates: 1 mo 0.173%; 3 mo 0.266%; 6 mo 0.394%; 1 yr 0.691%
30 yr FNMA 3.0 Apr: @9:30 102.53 +6 bp (+33 bp frm 9:30 yesterday)
15 yr FNMA 3.0 Apr: @9:30 104.83 +10 bp (+16 bp frm 9:30 yesterday)
30 yr GNMA 3.0 Apr: @9:30 103.17 +3 bp (+20 bp frm 9:30 yesterday)
Dollar/Yen: 110.43 -0.33 yen
Dollar/Euro: $1.0963 +$0.0039
Gold: $1198.60 +$7.20
Crude Oil: $48.10 +$0.59
DJIA: 17,972.61 -38.53
NASDAQ: 4967.73 -27.00
S&P 500: 2090.51 -0.92