|The only data today, March durable goods orders, was expected up 0.5% and ex transportation orders up 0.3%. Orders increased 4.0%, excluding transportation orders down 0.2%. Those are normally the headlines but looking into the guts of the report it isn’t good. Orders for business equipment declined, the seventh month it has declined. Non-military capital goods excluding aircraft, a proxy for future corporate spending on new equipment, dropped 0.5%. February orders were revised to show a 2.2% decline from -1.1% originally reported, the biggest drop since July 2013. All of the increase in orders were aircraft and autos. On the news treasuries improved and MBS prices increased; both minor reactions on the initial reaction.
Finance ministers from the EU meeting today in Latvia to discuss Greece’s debt. Each in their turn saying there is no deal and the outlook depends on the Greek government to quit trying to shortcut what has to be done if Greece is to receive bailout money now or in the future. According to news wires once the meeting began the Greek prime minster was seriously castigated for dragging his feet and attempting an end run around the requirements set down by the EU, ECB, and IMF to cut spending and move more to austerity that Greece has essentially refused to take seriously, at least that is the message being sent today. Greece tried an end run around the EU by pleading with Germany’s Merkel and France’s President Hollande; the rules are clear, it’s the finance ministers who have to sign off on any aid disbursement and Merkel said last month she’s not prepared to override those controls. US and global markets watching closely but are not reacting too much one way or the other.
More positive news from Germany; the The Ifo institutes’s business climate index rose for a sixth month to 108.6 from 107.9 in March; a 10 month high.
At 9:30 the DJIA opened +13, NASDAQ +38, S%P +4. 10 yr 1.93% -2 bp and 30 yr MBS price +9 bp from yesterday’s close and +16 bp from 9:30 yesterday.
The dollar is weakening this morning on the durables orders, pushing the stock indexes a little, and improving the bond and mortgage markets. The recent strength of the dollar has been slowing US export so any weakness is supportive to the US economy. The dollar still well off its high of a year ago when it traded at $1.40 to 1 euro. The dollar has had a great run over the past few months, driven by expectations that the Fed will raise rates while other central banks around the world are still aggressively easing. This morning Rick Santelli commented that traders in the bond market are more focused on the dollar’s movement as an indicator for short term trading opportunities.
NASDAQ finally got back to levels in 2000, a new high yesterday. Apple is the main driver, it accounts for 23% of the increase in the index.
Looking forward; the FOIMC meeting next week. Treasuries looking positive but not likely to gain much with the uncertainty surrounding the Fed’s intentions.
We have stayed flat the last two days after the strong increase in yields on Wednesday. Still bullish longer term; the 10 on the increase in rate Wednesday held at 1.98% the high early last month. Traders seizing on that bought bonds yesterday and are buying a little this morning. The 10 also has managed to find support at its 40 day average at 1.95%; two months in a well-defined range. Encouraging that there was no follow-through from Wednesday’s selling. We have lowered the support level from 2.02% on the 10 to 1.98% Wednesday’s high matching the high yield in early March. The bullish technical bias remains intact.
PRICES @ 10:00 AM
10 yr note: +11/32 (34 bp) 1.92% -3 bp
5 yr note: +6/32 (18 bp) 1.33% -4 bp
2 Yr note: +1/32 (3 bp) 0.52% -1 bp
30 yr bond: +18/32 (56 bp) 2.63% -2 bp
Libor Rates: 1 mo 0.181%; 3 mo 0.277%; 6 mo 0.404%; 1 yr 09.699%
30 yr FNMA 3.0 May: @9:30 102.25 +9 bp (+17 bp frm 9:30 yesterday)
15 yr FNMA 3.0 May: @9:30 104.86 +15 bp (+16 bp frm 9:30 yesterday)
30 yr GNMA 3.0 May: @9:30 103.14 +11 bp (+13 bp frm 9:30 yesterday)
Dollar/Yen: 119.09 -0.49 yen
Dollar/Euro: $1.0830 +$0.0006
Gold: $1186.70 -$7.60
Crude Oil: $56.89 -$0.85
DJIA: 18,057.89 -0.80
NASDAQ: 5091.40 +35.34
S&P 500: 2116.72 +3.79