August 26th, 2011 12:44 PM by Lehel S.
The rate markets started better this morning prior to the preliminary Q2 GDP report at 8:30. Q2 GDP was widely expected to be revised lower from last month's first look on the advance release; as reported GDP was revised lower to +1.0% frm +1.3% on the advance look. Q2 deflator at +2.5% while personal consumption up 0.4%. A month from now we will see the final Q2 GDP, probably won't see any change. Prior to the data the 10 yr traded up 12/32 to 2.19% -3 bp and mortgages +7/32 (.22 bp); treasuries did slip back a touch but still held price gains then moved higher in price. At 9:00 the 10 yr +17/32 at 2.18% while mortgage prices at 9:00 +12/32 (.37 bp frm yesterday's close.
Today is Bernanke Day; he is about to begin his long-awaited speech at 10:00 with some expecting another easing announcement while an equal number not expecting anymore easing. Most emerging-market stocks fell before his speech on concerns that the central bank will take further steps to boost growth in the world’s largest economy. On the flip side; the dollar weakened against most of its major counterparts on speculation Bernanke may disappoint investors betting on added stimulus and a report forecast to show U.S. growth slowed. European stocks retreated for a second day as investors waited to see whether he will signal further steps to support the economy. Asian shares rose and U.S. index futures fell. Mass uncertainty prior to 10:00 this morning.
Yesterday Germany reported its economy had slowed in Q2; the U.K. economic growth also slowed in the second quarter as manufacturing shrank and services showed signs of losing momentum.U.K. gross domestic product rose 0.2% from the first quarter, the same as estimated a month ago, the Office for National Statistics said today in London. Output rose 0.7% from a year earlier. A separate report showed services fell 0.1% in June, the final month of the quarter. All of Europe and the USeconomies are faltering, US interest rates will stay very low as long as the global economies suffer another setback. Bernanke will likely refrain from saying a double dip is on the way, but he has to admit growth worldwide has slowed.
At 9:30 the DJIA opened -55, the 10 yr +21/32 at 2.16% -7 bp and mortgage prices +13/32 (.41 bp).
At 9:55 the U. of Michigan consumer sentiment index expected at 56 was 55.7 frm 54.9 at mid-month; the expectations index increased to 47.4 frm 45.7 and the 12 month outlook remained unchanged at 40. The various indexes are still very low compared to those when the economy was stronger. No direct reaction, but as 10:00 closed in treasuries and mortgages were backing down from their best levels but still quite good on the session.
Stay tuned this morning; Bernanke speech may move markets. Depends on what he says and how markets will interpret it.