August 9th, 2010 9:23 AM by Lehel S.
Treasuries and mortgage rallied Friday on yet another weaker than expected employment report for July; job gains were less than expected and lower revisions in June non-farm jobs pushed the bellwether 10 yr note to new lows at 2.82%, previous to Friday's decline the 10 yr had built strong resistance at 2.88%. This morning the stock indexes are better thus pressuring the rate markets. At 9:00 the 10 yr note -3/32 at 2.83% and mortgage prices off 1/32 (.03 bp). There are no economic releases today to think about. At 9:30 the DJIA opened +30, 10 yr note -4/32 2.83% +1 BP and mortgage prices -1/32 (.03 bp).
Tomorrow Treasury begins its quarterly refunding with $34B of 3 yr notes auctioned at 1:00. Of more interest tomorrow, the FOMC meeting will conclude with its so-called policy statement at 2:15 pm. The statement is always very short and usually has nothing new; the statement will likely re-iterate for the umpteenth time that the Fed will keep rates low for an extended period, that the economy is slowly recovering, that consumers are still consolidating, and that unemployment and the housing sector are keeping consumer spending from increasing much.
The key economic data this week doesn't hit until Thursday and Friday with weekly claims, July retail sales, July CPI and the mid-month U. of Michigan consumer sentiment index.Treasury will conduct auctions on Tuesday, Wednesday and Thursday, borrowing another $74B from taxpayers to fund the expanding federal budget deficits brought on by failed stimulus, bailing out the big banks and falling tax revenues. Meanwhile in Washington politicians from both sides of the aisle are giving themselves raises and while no tax increases are likely until after the Nov elections, the tax increase talks are picking up momentum.
This Week's Economic Calendar;
8:30 am Q2 productivity (+0.1%)
Q2 unit labor costs (+1.4%)
10:00 June wholesale inventories (+0.4%)
1:00 pm $34B 3 yr note auction
2:15 pm FOMC policy statement
7:00 am MBA mortgage applications
8:30 am June trade deficit (-$42.5B)
1:00 pm $24B 10 yr note auction
2:00 pm July Treasury budget deficit (-$169B)
8:30 am weekly jobless claims (-14K to 465K)
1:00 pm $16B 30 yr bond auction
8:30 am July retail sales (+0.5%; ex auto sales +0.2%)
July CPI (+0.2%; ex food and energy +0.1%)
9:55 am U. of Michigan consumer sentiment index (70.0 frm 67.8)
10:00 am June business inventories (+0.2%)
So far this morning the rate markets are managing to hold Friday's gains with the stock market hanging around unchanged. The coming Treasury auctions will likely keep rates in a narrow and relatively unchanged area as long as equity markets keep focused on the weak economic outlook. That however is where the rubber meets the road; the equity markets remain convinced all is right and consumers don't matter as much in this recovery. Amazing how the spinsters can paint a picture any way convenient.