July 19th, 2010 10:04 AM by Lehel S.
Last week; a good one for the bond and mortgage markets. The 10 yr note yield fell to 2.93% frm last Friday's close at 3.06%, mortgage prices for 30 yr conventionals increased by 22/32 (.69 bp) on FHAs +32/32 (.100 bp), 15 yr conventionals 27/32 (.84 bp); mortgage rates fell about 8 basis points. The DJIA -101, gold -$17.00, crude oil -$0.32. Not so good for the economic outlook however. Two manufacturing data points, the NY Empire State and the Philadelphia Fed business index, both weaker than forecasts; and the U. of Michigan consumer sentiment index plunged to 66.5 frm 76.0 well below estimates. Consumers are not nearly as comfortable about the state of the economy as Wall Street and Washington.
This Week; is all about the June housing situation. June housing starts and permits on Tuesday and June existing home sales on Thursday. Other than weekly jobless claims on Thursday that is all there is for data. Fed chief Bernanke will speak on Wednesday and Thursday. Housing starts are expected to be down 4.0%, existing home sales for June -11.0% however, we expect sales to be lower than that, -14%. Thursday Treasury will set up for the following week's auctions announcing the amounts for the 2 yr, 5 yr and 7 yr note auctions. The bellwether 10 yr note yield is now just 5 basis points from its recent lows before the correctional selling; likely will be some resistance in the current level of rates. The equity markets should decline this week and add support to the low rate levels.