Unchanged in the treasury market early this morning with US and Europe’s stock markets looking better. No economic reports today. The Iraq/Islamic State; still a concern but the Kurds did re-take some of the ground the militants took last week with the help of US bombs. Iraq politics getting messy; the president of Iraq appointed a different prime minister from the one presently holding the job, setting up a major confrontation between the two politicians. The president acknowledged Saturday that U.S. spies and policy makers had underestimated the group, also known as ISIS and ISIL. "There is no doubt that their advance, their movement over the last several months has been more rapid than the intelligence estimates, and I think the expectations of policy makers both in and outside of Iraq," he said.
Ukraine/Russia, not much new over the weekend. A little less tension than last week, but the undertone is still alive and well as it is in Iraq and the mid-east in general. The focus currently is in the Islamic State attacking key Kurdish and Sunni positions but the situation in Syria is beginning to re-boil. Geo-political conditions are likely to continue to drive investors into the arms of US treasuries and help to keep mortgage rates frm increasing. These global issues have a life of hours at times; one day a lot of concern, the next not so much. As the various issues rise and fall in the troubled spots, the bond markets here and globally, ride the waves.
At 9:30 the DJIA opened +45 after increasing 186 on Friday, the NASDAQ opened +19 after jumping 36 on Friday, the S&P +7 after increasing 22 on Friday. The 10 yr note rate unchanged frm Friday at 2.42%; 30 yr MBS prices +6 bps frm Friday’s close. There are no economic reports out today. Last Friday the strong rally in the stock markets was on optimism the tensions in Ukraine and Iraq are likely to ease. That view is following through this morning but those positive views are built on soft foundations and can, (will) change on a dime.
All the technicals we track remain bullish for the bond and mortgage markets, the stock market rallied Friday and so far this morning; good news for 401Ks but the volume on Friday and likely today was very thin, low volume does take a little away from the improvements; the last two weeks of August usually are slow in financial markets so movements can be exaggerated somewhat. This week is Treasury re-funding, it occurs every quarter with issuance of a new 10 yr note and 30 yr bond, other than that there is little significant difference between the monthly 10s and 30s other than re-opening the current on the run note and bond. Demand will drive attention in this present geo-political bouncing ball. Market volatility is possible this week on developing news out of the mid-east and Ukraine.
This Week’s Calendar:
10:00 am June JOLTS (job openings) (4.588 mil frm 4.635 mil in May)
1:00 pm $27B 3 yr note auction
2:00 pm July Treasury budget (-$96.0B)
7:00 am weekly MBA mortgage applications
8:30 am July retail sales (+0.3%; ex auto sales +0.4%)
10:00 am June business inventories (+0.4%)
1:00pm $24B 10 yr note auction
8:30 am weekly jobless claims (+6K to 295K)
- July export prices (-1.0%) July import prices (-0.2%)
1:00 am $16B 30 yr bond auction
8:30 am July PPI (+0.1%; ex food and energy +0.2%)
- August NY Empire State manufacturing index (20.0 frm 25.6 in July)
9:15 am July industrial production and capacity utilization (production +0.3%, capacity utilization 79.2% frm 79.1% in June)
9:55 an U. of Michigan mid-month consumer sentiment index (82.3 frm 81.8)