A slightly better start this morning ahead of April new home sales; at 9:00 the 10 2.53% -2 bp and 30 yr MBS price +8 bp after being down 5 bps yesterday. The long weekend is at hand, many have already shut down and by 11:00 this morning more will be headed to the beach at the Hamptons. The bond and MBS markets will close at 2:00 this afternoon, stock markets will go the distance at regular hours. At 9:30 the DJIA opened +13, NASDAQ +5, S&P +2; 10 yr note at 9:30 2.53% and 30 yr MBS price +10 bps from yesterday’s close.
Some improvement in the Ukraine/Russian situation? Looks as if the tensions are easing based on Putin’s comments today. Putin on TV in St. Petersburg taking questions from reporters saying; "What we want for Ukraine is peace and calm,"…. "After their election, of course we will cooperate with the newly elected head of state." Putin said Friday he will respect "the will of the Ukrainian people" in presidential elections this weekend and would work with whoever is elected. He said the crisis has affected the level of trust with the West, saying the overthrow of former President Viktor Yanukovych was a coup supported by the U.S. and EU. "What next? Chaos and a full-scale civil war," Mr. Putin said.
Six weeks ago when the turmoil began with Crimea and Russian troops stationed on the border of Ukraine, the run to safety into treasuries and German bunds dropped interest rates to present levels. As we noted yesterday, the situation has eased a bit taking away one of the props keeping rates low. The presidential election on Sunday will define the next steps in what may develop into a real civil war. It depends on how the separatists react. Putin has played the card well, standing back and indicating he would co-operate with whomever is elected. That however depends on the separatists’ next move; the election won’t go the separatists’ way.
April new home sales were expected to be up 8.6% to 420K units from 384K units in March, but March revised now to 407K units. April sales were better than expected, at 433K units. With the upward revision in March the percentage increase in April is +6.0%. A much better report than was expected but still leaves the outlook murky. A week ago the NAHB housing market index fell to 45 the lowest since August 2013. There was no initial reaction to the better headline in either MBSs, treasuries or the stock indexes.
The bond and mortgage markets close at 2:00