Rate snapshot: Markets open up, Treasury to sell $32bn in 2-year notes

by MPA22 Apr 2014

Yesterday not much change, this morning also started quietly.
Scanning news overnight there isn’t anything of consequence that would move markets. US earnings reports are in full swing this week with 150 companies reporting. Late yesterday afternoon Netflix reported better results than forecasts. A number of news items about mergers and acquisitions but nothing that directly effects interest rates in early activity. At 9:00 the 10 traded unchanged from yesterday with MBS prices also essentially unchanged (-3bp); stock indexes at 9:00 also flat into the 9:30 open.
Not that it matters to markets, Joe Biden is in Ukraine saying "Russia should stick to its international commitments and obligations," Mr. Yatsenyuk said. "They should not behave as gangsters in the modern century." He warned Russia to pull back its forces along the Ukrainian border and publicly demand pro-Russian forces release occupied government buildings in the east, or he said Moscow will face additional economic sanctions in the coming days. A lot of rhetoric with no substance or force behind in other than sanctions that may harm the EU and not impact the US much.
Feb FHFA housing price index, expected +0.3%, was +0.6%. Yr/yr prices have increased 6.9% but down from 7.2% yr/yr in January. No reaction to the report with March existing home sales due out at 10:00. The decline in Feb yr/yr is the smallest gain in a year; the report suggests the housing sector is cooling. Not new news, the housing sector has been slowing since last August. The FHFA index measures transactions for single-family properties financed with mortgages owned or securitized by Fannie Mae and Freddie Mac. It doesn’t provide a specific price for homes.
At 9:30 the DJIA opened +16, NASDAQ +15, S&P +2; 10 yr at 9:30 2.74% +2 bp and 30 yr FNMA MBS price -5 bps from yesterday’s +6 bps.
At 10:00, March existing home sales were expected to have declined 0.7% to 4.56 mil units; as released sales declined 0.2% to 4.59%. Yr/yr sales of existing home sales down 7.5%, homes with sales prices at or under $100K down 15% yr/yr. The median sales price $198,500, up 7.9% yr/yr. A regional Fed report, the Richmond Fed manufacturing index, expected at zero was up to 7 after -7 in March.
This afternoon Treasury will sell $32B of 2 yr notes at the highest rate this year. With the Fed expected to begin  increasing interest rates sometime next year (Bloomberg surveys indicate markets looking for an increase next summer), the 2 yr sold today will not expire until after the Fed increases rates----at least that is the current view, certainly subject to change on any comments from Janet Yellen.
The recent increase in the rate on the 10 yr note has turned most of our technical indicators from slightly bullish to now slightly bearish. As note here previously, in this kind of generally flat market we don’t pay too much attention to the momentum oscillators. It takes very little movement to change the technical outlook. The longer outlook though is still bearish for rates with the Fed ending monthly purchases of treasury’s and MBSs and belief the economy and inflation will begin to increase---a view we still question but we don’t fight the tape. Stock indexes refuse to break, earnings a little better, and the Fed repeating its continuing support as long as needed.

RateSnapshot courtesy of TBWSratealert.com


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