Rate snapshot: Home prices improve, stocks start strong

by MPA27 May 2014

Generally a quiet open this morning after the holiday;
the stock indexes though started strong right out of the box. At 8:30 April durable goods orders were much better than estimates, orders increased 0.8% against forecasts of -1.3%; ex transportation, a more significant look were up 0.1% against -0.2% expected. The better orders helped the stock indexes a little but did not generate any selling in treasuries and MBSs. At 9:00 the March Case/Shiller home price index jumped 12.6% with forecasts for 11.9%; it’s the 20 city index so if you don’t live in one of the 20 cities the only takeaway is that overall prices are improving but it depends on where you are as to the amount. Shiller in his interview said price increases are slowing and he doesn’t have a reason why. At 9:00 the March FHFA housing price index was up 0.5% with forecasts calling for +0.7%.
The last of the data today; at 10:00 May consumer confidence index from the Conference Board, consensus estimate was 83.0 from 82.3 in April; as reported the index did come at 83.0.
Petro Poroshenko; the billionaire candy king, won the Ukraine election as the new president and vowed to wipe out the separatists. Troops killed “dozens” of rebels without suffering any losses, Interior Minister Arsen Avakov said today, while the mayor’s office in the eastern city of Donetsk said 40 people died and 31 were wounded. Gunmen also broke through the border from the Russian side after a firefight with government forces overnight, and the self-proclaimed Donetsk People’s Republic asked Russian President Vladimir Putin for humanitarian and military help, according to separatist leader Denis Pushilin. “The anti-terrorist operation is in an active phase now,” First Deputy Prime Minister Vitaliy Yarema told journalists in Kiev today. “We’ll continue this operation until there are no terrorists on Ukraine’s territory.”
Treasury is back borrowing; at 1:00 this afternoon $31B of 2 yr notes will be auctioned. Usually the 2 has little impact on the long end including MBSs. Wednesday $35B of 5s can influence the 10 and MBSs but not much. Thursday $29B of 7 yr notes will be watched by traders, a better indication for the longer end of the curve.
This Week’s Calendar:
             8:30 am April durable goods (as reported +0.8%; ex transportation +01%)
             9:00 am March Case/Shiller (as reported 20 city increase +12.6%)
                          March FHFA housing price index (as reported up 0.7% against estimates of +0.5%)
             10:00 am May consumer confidence index from the Conference Board (as reported 83.0)
              1:00 pm $31B 2 yr note auction
              7:00 am MBA mortgage applications
              1:00 pm $35B 5 yr auction
              8:30 am weekly jobless claims (-9K to 317K)
                           Q1 GDP (-0.5%)
             10:00 am    April pending home sales (+1.0%)
              1:00 pm $29B 7 yr note auction
              8:30 am April personal income and spending ( income +0.4%; spending +0.2%)
              9:45 am May Chicago purchasing mgrs. index (61.0 from 63.0 in April)
              9:55 am U. of Michigan consumer sentiment index (82.5 from 81.8)
Nothing is moving the bond and MBS markets these days; the 10 and MBSs are stuck in a nice low rate range. The 10 has been confined to a 4 bp range for six sessions and is likely to continue that narrow range again today. Technicals are still slightly bullish but not likely to improve much as long as the stock market continues to gain ground. The outlook for stocks has become more concerning but so far the indices continue to increase. Next week the ECB will meet on June 5th, it has been widely expected the bank will add another QE to attempt to jack up the EU economies. Just over a week before the ECB’s next policy meeting, where it is predicted to cut interest rates to stoke inflation, central-bank officials and researchers are meeting in Portugal, to discuss current monetary thinking. Draghi, who has shown support for measures from negative rates to liquidity injections and large-scale asset purchases, said yesterday that buying packaged loans could reduce the “drag” on the economy.



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