|Bonds and MBSs opened weaker this morning (price); Friday the 10 yr note yield declined 4 bps to 1.92% and improved the near term technical outlook. Looking for any bright spot, however the rate markets are well-contained in tight trading ranges; until the ranges are breached our models are best described as neutral. The 10 as noted Friday in a 8 bp range the last 28 sessions (1.86% to 1.94% closing). MBS prices also in a very narrow range tracking the 10 yr note.
This week the main sport event is Pacquiao/Mayweather; the main financial event, the FOMC policy statement; the fight on Saturday night, FOMC at 2:00 Wednesday afternoon. Treasury will start it’s bi-weekly auctions today with $26B of 2s at 1:00 pm. There are no major data points today. No real changes over the weekend in Greece/EU attempts to work out a deal to get funds to save it frm default. Weekend polls showed a majority of the country’s people (Greeks) want the government to make compromises needed to release funds for its economy. The government is hoping deposits of local governments, cities and other funds to meet end-of-month payments of over 1.5 billion euros ($1.62 billion) after euro-area finance ministers on Friday said they won’t disburse more aid until bailout terms are met. The Greek prime minister re-thinking is election pledge as citizens want Greece to stay in the EU.
Greek news should not be taken at face value, too much day to day changes but Europe’s stock markets did better because on the momentary news. The Stoxx Europe 600 Index added 0.9% to 412 at 8:06 p.m. US time. .
US stocks opening better this morning; the bond and MBS markets began under a little pressure; at 9:00 the 10 +1 bp while 30 yr FNMAs -5 bp frm Friday’s close. At 9:30 the DJIA opened +92, NASDAQ +14, S&P +6; 10 yr note 1.93% +1 bp; 30 yr MBS price -6 bps frm Friday’s close and +10 bp frm 9:30 Friday morning.
This Week’s Calendar:
1:00 pm $26B 2 yr note auction
9:00 am Feb Case/Shiller 20 city home price index (+4.8% yr/yr, +0.7% frm January)
10:00 am April Consumer Confidence (103.0 frm 101.3 in March)
1:00 pm $35B 5 yr note auction
7:00 am weekly MBA mortgage applications
8:30 advance Q1 GDP (+1.0% frm +2.2% in Q4; price index (deflator) +0.5%)
10:00 am NAR March pending home sales (+1.0% frm Feb’s +3.1%)
1:00 pm $29B 7 yr note auction
2:00 pm FOMC policy statement (no press conference)
8:30 weekly jobless claims (-7K to 288K)
– March personal income and spending (income +0.2%, spending +0.5%; Personal consumption expenditures core +0.2%)
– Q1 employment cost index (+0.6%, Q4 +0.6%)
9:45 a April Chicago purchasing mgrs. index (50.0 frm 46.3 in March)
10:00 am April ISM manufacturing index (52.0 frm 51.1 in March)
– March construction spending (+0.4% , Feb -0.1%)
– U. of Michigan consumer sentiment index (96.0 frm 95.9 at mid-month)
– No time April auto and truck sales
This week there are a number of key economic reports but the FOMC policy statement on Wednesday afternoon is at the top of the list. Once the statement is reported, Thursday and Friday’s data will increase focus on the policy statement in the context of the data. Q1 advance GDP on Tuesday is expected up just1.0% frm +2.2% growth in Q$ 2014. The advance report is usually revised the following month when the preliminary read is reported; the advance report lacks some the data from the third month in the quarter. Treasury auctions recently haven’t garnered the demand in 2014, demand bidding (bid/cover) will be a major focus.
Technicals are neutral presently; the 28 day trading range in treasuries and MBSs hasn’t moved interest rates since early March. Our outlook remains constructive but data dependent. Technically our work’s longer view remains bullish but as we have said recently the degree of bullishness currently is best described as neutral.
PRICES @ 10:10 AM
10 yr note: -10/32 (31 bp) 1.95% +3 bp
5 yr note: -6/32 (18 bp) 1.36% +4 bp
2 Yr note: -1/32 (3 bp) 0.53% +2 bp
30 yr bond: -20/32 (63 bp) 2.64% +3 bp
Libor Rates: 1 mo 0.181%; 3 mo 0.277%; 6 mo 0.408%; 1 yr 0.706%
30 yr FNMA 3.0 May: @9:30 102.34 -6 bp (+10 bp frm 9:30 Friday)
15 yr FNMA 3.0 May: @9:30 104.84 -8 bp (-2 bp frm 9:30 Friday)
30 yr GNMA 3.0 May: @9:30 103.17 -14 bp (+4 bp frm 9:30 Friday)
Dollar/Yen: 119.38 +0.39 yen
Dollar/Euro: $1.0867 -$0.0006
Gold: $1184.90 +$9.90
Crude Oil: $57.47 +$0.32
DJIA: 18,143.90 +63.76
NASDAQ: 5116.38 +24.30
S&P 500: 2123.95 +6.26