Rate snapshot: Stock indexes rally, factory orders beat expectations

by MPA05 Aug 2014


Interest rate markets opened weaker this morning
with the 10 at 2.50% at 9:00 am; US stock indexes rallied yesterday, this morning the key indexes at 9:00 a little lower. No news of consequence until 10:00 am when the ISM services sector index for July and June factory orders.
At 9:30 the DJIA opened -65, NASDAQ -20, S&P -9; 10 yr note 2.50% +1 bp. 30 yr MBS price -5 bps.
Globally: Israel withdrew its military forces from the Gaza Strip, completing a 20-day ground operation in the Palestinian territory at the start of an already fragile three-day truce that officials hope will buy time for broader peace talks. Ukraine, the conflict between Russia and Ukraine deepened on Monday after several hundred Ukrainian troops crossed over the Russian border and surrendered. The troops moved into Russia after being pinned down by rebel forces in their country's east, the Ukrainian government said. Russian officials said 438 Ukrainian troops had surrendered. A Ukrainian military spokesman said that the troops who had gone to the Russian side had run out of ammunition and destroyed their equipment before passing the border unarmed.
July ISM services sector index at 10:00 am, expected at 56.5, jumped to the best level since Dec 2005 at 58.7; new orders component increased to 64.9 from 61.2 in June, employment ncreased to 56 from 54.4 and prices pd component down to 60.9 from 61.2. The services sector followed the increase in the July manufacturing index last week. The non-manufacturing index has averaged 55 this year compared with 54.7 in 2013. China’s service industries stagnated in July as a private index fell to a record low, suggesting the government’s stimulus measures are failing to gain traction outside manufacturing.
June factory orders were also better than expectations, thought to be up 0.6% orders increased 1.1% May revised lower to -0.6% from -0.5%.
The reaction to the 10:00 data pushed interest rates higher, prior to the reports the 10 traded at 2.50% and MBS prices -3 bps from yesterday’s close. The DJIA was down 90 points then rallied to -50 before backing off again at 10:15 am. At 10:15 the 10 yr note at 2.51% +2 bp, 30 yr MBS prices -11 bps and -6 bps from 9:30 levels. The rest of the day will be about how stocks trade, treasuries and MBSs won’t improve as long as the stock market holds up. Difficult to anticipate these days, the equity markets are experiencing an increase in intraday volatility.
PRICES @ 10:10 AM
10 yr note: -7/32 (22 bp) 2.51% +2 bp
5 yr note:-5/32 (15 bp) 1.68% +3 bp
2 Yr note: unch 0.47% unch
30 yr bond: -19/32 (59 bp) 3.32% +3 bp
Libor Rates: 1 mo 0.156%; 3 mo 0.237%; 6 mo 0.330%; 1 yr 0.562%
30 yr FNMA 4.0 Aug: @9:30 105.55 -5 bp (-5 bp from 9:30 yesterday) 3.5 coupon 102.28 -6 bp (-7 bp from 9:30 yesterday)
15 yr FNMA 3.0 Aug: @9:30 103.47 unch (+4 bp from 9:30 yesterday)
30 yr GNMA 4.0 Aug: @9:30 106.20 -2 bp (-2 bp from 9:30 yesterday) 3.5 coupon 103.39 -6 bp (-10 bp from 9:30 yesterday)
Dollar/Yen: 102.71 +0.14 yen
Dollar/Euro: $1.3382 -$0.0040
Gold:$1287.80 -$1.10
Crude Oil: $98.02 -$0.27
DJIA: 16,516.69 -52.59
NASDAQ: 4366.25 -17.64
S&P 500: 1931.18 -7.91

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