September 8th, 2011 7:07 AM by Lehel S.
Yesterday the stock market had a nice day, as is the case when stocks do better the bond and mortgage markets were weaker. This morning the stock market is weaker, therefore the bond and mortgage markets are doing better; neither however is much changed from yesterday's closes. The rate markets haven't seen any real movement for the last two weeks; the 10 yr note finding support at 2.30% and meets resistance at 2.00%. Mortgage prices equally tied in a narrow range tracking the 10 as it always does.
At 8:30 weekly jobless claims were expected to have declined to 400K from 409K posted last week; claims were up 2K to 414K and last week's claims were revised from 409K to 414K. Continuing claims at 3.717 mil frm 3.747 mil last week. Unemployment claims are locked at the 400K level, haven't moved below it, nor substantially above it. Treasuries and mortgages prior to the claims report were up 16/32 (10 yr) and +8/32 (.25 bp) on mortgage prices. By 9:00 the 10 yr up 10?32 at 2.01% while mortgage prices +4/32 (.12 bp).
July US trade deficit was expected at -$51.5B, as reported -$44.81B; the better deficit will add some to Q3 GDP growth.
ECB head Jean-Claude Trichet said this morning the economic outlook in Europe is not improving; saying the down-side risks are increasing. He noted inflation risks have subsided, implying the ECB will keep interest rates on hold after increasing them recently to head off inflation concerns; the central bank raised rates in April and July to combat price pressures. The central bank now forecasts inflation to average between 2.5% and 2.7% this year and between 1.2% and 2.2% in 2012. The debt crisis in Europe is increasing and is bringing the solvency of some of the areas banks into question. The debt mess has not seen any significant progress in months. Yesterday the German supreme court ruledGermany could continue to support recovery plans, markets took it as a positive rallying equity markets that fed to the US markets.
At 1:30 Bernanke will speak in Minneapolis; unlikely he will say anything that would precede the Presidents big speech this evening at 7:00 pm. The President is expected to announce a jobs creation plan that will ultimately cost $300B. Republicans will likely resist, after all that is what we live with, if one party says its white the other automatically says its black. Republicans have to temper their opposition to whatever Obama proposes this evening, people are fed up with political sniping as the economy slides toward another recession. Certainly, whatever Obama proposes won't sit well with conservatives; however at this point something has to be done. Whether Obama's plans work or not his presidency is on the line; if his plan fails he will have a big hill to climb in order to be re-elected.
At 3:00 this afternoon July consumer credit data will be released; it is one of my favorite reports each month as it clearly shows what consumers are doing----and spending. Unfortunately the data is old when it is released.
The financial markets may be quiet through the rest of the day with the 10 yr hugging 2.00% and stock indexes lower. Positioning this morning ahead of Obama this evening. Technical indicators remain positive but unless the bellwether 10 yr can break below 2.00% within a few days rates may increase a little, likely testing 2.30%.
At 9:30 the DJIA opened -65, the 10 yr note +11/32 at 2.00% and mortgage prices at 9:30 +5/32 (.15 bp).