July 22nd, 2011 7:02 PM by Lehel S.
Treasuries and mortgages took a hit yesterday on increased belief a plan will emerge in Europe to bring those debt ladened countries in the EU back from the brink and some optimism that the Washington crowd might actually get a deal on increasing the debt ceiling and cut some spending. This morning though the mortgage market in early trading has re-cooped all of its price declines from yesterday. Yesterday the 10 yr note yield jumped 10 basis points after toying with the low rate back in June. As we have noted many times, when the 10 yr note rate falls below 3.00% it enters a level that will be difficult to maintain.
There are no economic reports today; yesterday the Philly Fed index, while back above zero, did not meet forecasts. The economy is still struggling. Stocks rallying on all the better Q2 earnings and belief growth will increase. At 9:30 the DJIA opened -33, the 10 yr note +10/32 at 2.98% -4 bp and mortgage prices +9/21 (.28 bp).
The turmoil in Europe continued today; all attempts to structure a plan seem to meet dead ends. One day it appears good, the next back to square one. As the uncertainty continues it plays into our markets with increased volatility. German Chancellor Angela Merkel said government chiefs had learned from “systemic effects” in the single-currency area and widened the scope of their bailout fund to allow it to buy the bonds of debt-laden nations, support banks and offer credit lines. The agreement included new aid for Greece that embraced bondholders, prompting Fitch Ratings to say it will put a default rating on Greek debt. The risk is that the package will follow the pattern of previous agreements and eventually disappoint markets.
Here in the US still no deal to increase the debt ceiling; today Timothy F. Geithner was scheduled to meet this morning with Bernanke to discuss the implications of a failure of Congress to raise the debt limit in a timely manner, according to an administration official. William C. Dudley, president of the Federal Reserve Bank of New York, was also scheduled to take part in the meeting. Geithner has repeatedly said he expects Congress will raise the $14.3 trillion debt ceiling and that Republican leaders have taken default “off the table.” He has not discussed publicly any contingency plans in the event that the Aug. 2 deadline is not met.
Crude oil playing again close to $100.00/barrel. Gold +$16.00.