June 13th, 2011 1:02 PM by Lehel S.
Treasuries and mortgage markets opened weaker this morning with the US stock indexes looking slightly better after falling 172 points on Friday. The bellwether 10 yr still hanging close to 3.00%, unable to sustain under 3.00% for any length of time. There are no economic reports today but the momentum will pick up through the rest of the week after very little last week.
On the global picture, still no consensus in Europe over how to deal with Greece's debt problems. It seems one day they have have a plan, the next day not. Greece and other European countries are aiding the low rates in the US but mostly its the new momentary outlook that the economy is rolling over. While pessimism has increased recently it won't take more than a couple of better than expected key data points this week to swing the wobbly sentiment to one of more optimism. In essence the markets have little conviction about the economic outlook either way. From China; its economy is weakening; lending in the country is declining. China is wanting a cooling of its over-heated economy.
Paul Muolo at National Mortgage News is reporting that risk retention for lenders looks like it is dead. What a good way to start the week; hopefully his sources are correct. FDIC chairman Sheila Bair, a big booster of RR, leaves next month and exits the debate permanently. By August or so legislation is introduced that amends the Dodd-Frank bill and gets rid of the whole concept of risk retention, qualified residential mortgage and its cousin qualified mortgage. In other words this colossal industry headache goes away and mortgage bankers are happy and hopefully consumers will be, too. IN the panic and adolescent reaction to the sub prime mortgage meltdown Congress led by two totally unknowledgeable politicians, Barney Frank and Chris Dodd, ran amok in Washington with a 2800 page bill to reform the world; we only hope more intelligent heads will begin to prevail and correct the mess those two have made.
This Week's Economic Calendar:
Monday; no data
8:30 am May retail sales (-0.7%; ex auto sales +0.2%)
May PPI (+0.1%, ex food and energy +0.2%)
10:00 am April business inventories (+1.0%)
7:00 am weekly MBA mortgage applications
8:30 am May CPI (+0.1%; ex food and energy +0.1%)
June NY Empire manufacturing index (10.0 frm 11.9 in May)
9:15 am May industrial production (+0.2%)
May capacity utilization (77.0% frm 76.9% in Apr)
10:00 am NAHB June hosing market index (16, the same as it has been for months)
8:30 am weekly jobless claims (-6K to 421K; con't claims 3.69 mil frm 3.676 mil)
May housing starts and permits (starts +3.2% to 540K units annualized; permits -0.5% to 548K)
Q1 current account (-$130B)
10:00 am June Philadelphia Fed business index (7.0 up frm 3.9 in May)
9:55 am U. of Michigan consumer sentiment index (73.5 frm 74.3)
10:00 am May lading economic indicators (+0.4%, April -0.3%)
Crude oil prices down again today after last week';s report that Saudi Arabia will go it alone and increase production after Iran blocked any increase at the OPEC meeting. Gold down a little. The DJIA opened +37, the 10 yr -8/32 at 3.00% and mortgage prices down 6/32 (.18 bp).
Not real sure about it but one source is indicating Bernanke will speak at 2:30 this afternoon on the US debt issues.
The Pavlov's Dog trade continues; stock indexes up, bonds lower in price. We are not expecting much out of today's trade with no data today and a lot of it hitting through the rest of the week. The equity markets are oversold technically while the bond market is equally overbought now. No clarity yet but we worry that interest rates may begin to edge up a little, particularly if this week's various data points show some improvement compared to last months series of surprisingly weak data.