Creating Wealth for my Family and Friends
Daily Update near Market Close on Sept 11th 2009
Given the data next week, the technical failure of the 10 yr note at its resistance at 3.28%, and the unrelenting strength in the equity markets, we suggest locking all rate locks over the weekend; take the nice gains. We however continue to expect rates to move lower but from the present levels the market will need help to do so (some continual selling in equities). Still bullish but don't want to take the bet now.
Interest rates had another good day today; no inflation to worry about, no concerns that the Fed is about to increase interest rates and some safety moves into treasuries just in case.....the stock market actually turns over as many are hoping for. Markets generally do not cooperate and do what the majority want, and now the majority want equities to back off so there will be a better buying opportunity.
The stock market opened better this morning but it didn't last long, by 10:30 the indexes were lower on the day and stayed that way through the day. The bond and mortgage markets made nice strong moves this afternoon but once again the technical resistance at 3.28% stopped the rally and this afternoon the 10 yr yield backed away from that level. 3.28% is now a key resistance level; always has been for us but after the second try at it in less than two weeks traders now have it on their radar; it will take a push to crack it, likely coming next week on some economic release----most likely on Tuesday if August retail sales are weaker than expected.
This week didn't have much in the way of economic data; weekly claims declined 26K, more than expected but it was the Labor Day holiday on Friday last; last week's claims were revised up from the original release. Today's U. of Michigan consumer sentiment index jumped to a stronger read than expected but somewhat ignored as recently it has become more volatile. In my view the most significant data this week was the July consumer credit data on Tuesday; credit was expected to have shrunk by $4.1B, it crashed $21.6B and June consumer credit was revised lower, from -$10.3B to -$15.5B.
Consumer credit has been declining now for five months and we expect it to continue; markets however, took a look and ignored the potential impact for economic growth. Mortgage markets as reported by the MBA had a very good week last week; the overall applications index jumped 17.0% as mortgage rates worked lower.
Next week there is a lot of data; retail sales, housing starts and permits, industrial production and factory use, the Philly Fed business index are all key (also PPI and CPI but neither will be much of a concern). Next week we expect an increase in market volatility with the range of data. While we still expect interest rates to work a little lower, the week ahead may pull rates back higher. Technically, there is strong resistance at 3.28% for the 10 yr (it held again today on a retest of the rally); strong support at 3.50%.
On the week; Treasury found strong demand for the $70B of auctions (3 yr, 10 yr and 30 yr). The 10 yr note yield declined 12 basis points as did mortgage rates. Mtg prices on the week increased 24/32 on FHAs, +23/32 on FNMA 30s, and +16/32 on conventional 15s. Gold jumped $18.00 and crude oil +$1.35. The DJIA +164, NASDAQ +62, S&P +26.
PRICES @ 4:00 PM
10 yr note: 102.11 +3/32 3.35% unch
5 yr note: 100.11 -1/32 2.30% +1 BP
2 Yr note: 100.06 -1/32 0.90% +1 BP
30 yr bond: 105.18 +20/32 4.17% -4 BP
Libor Rates: 1 mo 0.243%; 3 mo 0.299%; 6 mo 0.677%; 1 yr 1.253%
30 yr FNMA 4.5 Nov: 100.12 -1/32 (-7/32 frm 10:00)
15 yr FNMA 4.0 Nov: 100.24 unch (-5/32 frm 10:00)
30 yr GNMA 4.5 Nov: 100.17 -1/32 (-6/32 frm 10:00)
15 yr GNMA 4.0 Nov: 101.13 -1/32 (-4/32 frm 10:00)
Dollar/Yen: 90.65
Dollar/Euro: $1.4581
Gold Dec: $1,007.90 +$11.10
Crude Oil Oct: $69.35 -$2.59
Interest rates had another good day today; no inflation to worry about, no concerns that the Fed is about to increase interest rates and some safety moves into treasuries just in case.....the stock market actually turns over as many are hoping for. Markets generally do not cooperate and do what the majority want, and now the majority want equities to back off so there will be a better buying opportunity.
The stock market opened better this morning but it didn't last long, by 10:30 the indexes were lower on the day and stayed that way through the day. The bond and mortgage markets made nice strong moves this afternoon but once again the technical resistance at 3.28% stopped the rally and this afternoon the 10 yr yield backed away from that level. 3.28% is now a key resistance level; always has been for us but after the second try at it in less than two weeks traders now have it on their radar; it will take a push to crack it, likely coming next week on some economic release----most likely on Tuesday if August retail sales are weaker than expected.
This week didn't have much in the way of economic data; weekly claims declined 26K, more than expected but it was the Labor Day holiday on Friday last; last week's claims were revised up from the original release. Today's U. of Michigan consumer sentiment index jumped to a stronger read than expected but somewhat ignored as recently it has become more volatile. In my view the most significant data this week was the July consumer credit data on Tuesday; credit was expected to have shrunk by $4.1B, it crashed $21.6B and June consumer credit was revised lower, from -$10.3B to -$15.5B.
Consumer credit has been declining now for five months and we expect it to continue; markets however, took a look and ignored the potential impact for economic growth. Mortgage markets as reported by the MBA had a very good week last week; the overall applications index jumped 17.0% as mortgage rates worked lower.
Next week there is a lot of data; retail sales, housing starts and permits, industrial production and factory use, the Philly Fed business index are all key (also PPI and CPI but neither will be much of a concern). Next week we expect an increase in market volatility with the range of data. While we still expect interest rates to work a little lower, the week ahead may pull rates back higher. Technically, there is strong resistance at 3.28% for the 10 yr (it held again today on a retest of the rally); strong support at 3.50%.
On the week; Treasury found strong demand for the $70B of auctions (3 yr, 10 yr and 30 yr). The 10 yr note yield declined 12 basis points as did mortgage rates. Mtg prices on the week increased 24/32 on FHAs, +23/32 on FNMA 30s, and +16/32 on conventional 15s. Gold jumped $18.00 and crude oil +$1.35. The DJIA +164, NASDAQ +62, S&P +26.
PRICES @ 4:00 PM
10 yr note: 102.11 +3/32 3.35% unch
5 yr note: 100.11 -1/32 2.30% +1 BP
2 Yr note: 100.06 -1/32 0.90% +1 BP
30 yr bond: 105.18 +20/32 4.17% -4 BP
Libor Rates: 1 mo 0.243%; 3 mo 0.299%; 6 mo 0.677%; 1 yr 1.253%
30 yr FNMA 4.5 Nov: 100.12 -1/32 (-7/32 frm 10:00)
15 yr FNMA 4.0 Nov: 100.24 unch (-5/32 frm 10:00)
30 yr GNMA 4.5 Nov: 100.17 -1/32 (-6/32 frm 10:00)
15 yr GNMA 4.0 Nov: 101.13 -1/32 (-4/32 frm 10:00)
Dollar/Yen: 90.65
Dollar/Euro: $1.4581
Gold Dec: $1,007.90 +$11.10
Crude Oil Oct: $69.35 -$2.59
Tags: Market, close, economic, mortgage, rates, reports, trends
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