Rate snapshot: Jobless claims up 24K

by MPA24 Apr 2014

March durable goods orders blew the doors off at 8:30 this morning and sent MBS prices lower.
Durables were widely thought to be up 2.0%, a solid number, as reported though orders jumped 2.6%; orders that exclude the volatile transportation orders were expected to have increased 0.9%, orders shot up 2.0%. The data was the strongest we have seen in months and has traders talking that manufacturing will now lead the economy higher. Durables are goods built to last three or more years. In Feb orders were also strong, +2.1%. The increase ex transportation orders is the biggest increase in more than a year.

Weekly jobless claims also at 8:30, were up 24K to 329K, consensus was for an increase of about 8K. The increase isn’t seen as a change in the decline of firings, but once again 300K didn’t break. Firings have slowed, which probably means employers are gaining confidence the world’s largest economy is strengthening. Markets essentially ignored the higher levels because spring holidays is hard to quantify from year to year, a Labor Department spokesman said as the figures were released to the press. Holidays such as Easter that occur during different weeks from one year to the next make it difficult for the Labor Department to adjust the data for these seasonal variations. There were no other special circumstances last week and no states were estimated. The four-week average of claims, a less-volatile measure than the weekly figure, climbed to 316,750 from 312,000 the week before, the lowest since 2007.

At 9:30 the DJIA +25, NASDAQ +43, S&P +7; 10 yr note 2.71% +1 bp and 30 yr MBS prices generally unchanged from yesterday’s close. A nice opening but by 10:00 the indexes were trading lower than at the open. Stocks being supported this morning on better earnings from Apple and Facebook. Trading in stocks has a direct impact on the bond and mortgage markets these days; so far this morning although the indexes are higher, the market looks shaky.

Nothing new from Ukraine this morning; US paratroopers landed in Poland for “exercises”; a show of force with little teeth but the US had to do something more than issue threats. With no news markets push the situation to the side today. Ukrainian authorities said that up to five pro-Russian militants were killed and three roadblocks overrun outside an eastern city at the heart of a local insurgency, as Kiev restarted a military operation to regain control in the region. Putin warned Ukraine against continuing its offensive against pro-Russian separatists after troops entered the eastern city of Slovyansk.

Treasury will auction $29B of 7 yr notes this afternoon; yesterday’s 5 yr auction was decent after a sloppy 2 yr auction on Tuesday. US interest rates have been in narrow ranges for months and likely will continue with some concerns over Russia/Ukraine, and there is still some lingering concern that the equity markets are overbought at the current levels. There is no inflation to be feared and the Fed is sending a number of conflicting signals about when the Bank will begin increasing rates. When viewed from a wider perspective, the overwhelming outlook is that eventually rates will begin to increase and the 20 bp yield range since January on the 10 will break above 2.80% and climb to 3.00% or higher by the end of the year.

Wish I had something else to say about the bond and mortgage markets than what we have been saying for weeks. Interest rates are not changing and haven’t changed in three months. Geo-political concerns and concerns that the stock market may be moving to a correcting sell-off. Over the last three weeks nothing in the way of news or data has had any material effect on interest rates. It won’t last forever but in the near term there isn’t anything that will break the quiet interest rate markets as long as no declines in stocks and no increasing military actions in Ukraine.

RateSnapshot courtesy of TBWSratealert.com


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