|Three data points at 8:30 this morning. Weekly jobless claims, expected up 7K jumped 31K back above 300K at 313K, the 4 wk average increased 11,500 to 294,500. Jan CPI expected down 0.6% fell 0.7%, the core ex food and energy expected +0.1% increased 0.2%. Jan durable goods orders, expected +2.0% increased 2.8%, excluding the volatile transportation orders (aircraft) expected +0.7% was up just 0.3%. Prior to the 8:30 data the 10 yr note traded down 1 bps to 1.95% and MBS prices up 4 bps, at 9:00 the 10 at 1.97% unch from yesterday and MBS price down 9 bps from yesterday’s close and down 7 bps from 9:30 yesterday.
Some better economic news out of Europe this morning. An index of executive and consumer confidence climbed to 102.1 in February from a revised 101.4, the European Commission said on Thursday, beating the 102 median estimate in a Bloomberg survey. In Germany, the number of people out of work declined a seasonally adjusted 20,000 to 2.81 million, twice as much as predicted. The Commission also said industrial confidence rose to minus 4.7 from minus 4.8 in January. Sentiment among consumers increased to minus 6.7 from minus 8.5, while confidence in the services sector declined. Minus reads however don’t inspire me much. Looks like Merkel will agree to a 4 month extension of Greece’s debt, kicking the can down the road.
Traders kind of ignoring the US data this morning, focusing a little more on the improved report out of Europe. The increase in claims likely most from the oil world where lay-offs are increasing as producers are slowly cutting back. Durable goods orders increased 2.8% in January after declining a downwardly revised 3.7% (from 3.3%) in December. Almost the entire increase in orders can be attributed to seasonal adjustments in the aircraft industry. GDP data for the U.K. and Spain came in as expected (U.K.: +0.5% q/q, Spain: +0.7% q/q). Germany released its unemployment report for February; the change in unemployment was -20K versus expectations of -10K, the unemployment rate was 6.5%, in line with expectations.
Europe data better this morning but the interest rates are going negative. German 7 yr note went negative this morning after the German 5 yr yesterday went at -0.8% and today -0.11%. Paying the government to take your money isn’t in m y 35 year wheel house, not sure how to think about it. The US treasury markets are not following this morning with our 10 yr at 1.98% compared to German 10 yr bunds at 0.30%.
Dec FHFA home price index at 9:00, expected +0.5% increased 0.8%. The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing, using data provided by Fannie Mae and Freddie Mac. The House Price Index is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.
The DJIA opened -29 but immediately jumped to -13; NASDAQ opened +4 while the S&P -1. The 10 yr note rate at 9:30 1.98% +1 bp and 30 yr MBS prices down 11 bps from yesterday’s close and -9 bps from 9:30 yesterday.
At 1:00 Treasury will auction $29B of 7 yr notes completing this week’s borrowing.
We floated overnight but did note the risk was elevated; not a good call based on where we are trading presently. The 10 has failed so far at the 20 and 40 day average and the momentum oscillators didn’t make the crossover, holding at neutral levels. Tomorrow the preliminary Q4 GDP report may be keeping traders uncertain. There is also a technical problem in the 30 yr bond market trading; complex but it is due to when a few years back Treasury stopped issuing 30s, now rolling over from March to June has caused confusion.
PRICES @ 10:00 AM
10 yr note: -2/32 (6 bp) 1.97% +1 bp
5 yr note: -2/32 (6 bp) 1.48% +1 bp
2 Yr note: -2/32 (6 bp) 0.64% +3 bp
30 yr bond: +2/32 (6 bp) 2.57% unch
Libor Rates: 1 mo 0.171%; 3 mo 0.261%; 6 mo 0.385%; 1 yr 0.677%
30 yr FNMA 3.0 Mar: @9:30 101.78 -11 bp (-9 bp frm 9:30 yesterday) (at 10:00 +4 bp)
15 yr FNMA 3.0 Mar: @9:30 104.62 unch (+1 bp frm 9:30 yesterday)
30 yr GNMA 3.0 Mar: @9:30 102.58 -3 bp (+4 bp frm 9:30 yesterday)
Dollar/Yen: 119.13 +0.27 yen
Dollar/Euro: $1.1223 -$0.0138
Gold: $1212.10 +$10.60
Crude Oil: $49.84 -$1.15
DJIA: 18,195.60 -28.97
NASDAQ: 4959.50 -7.63
S&P 500: 2107.72 -6.14