Rate Snapshot: Quiet markets after Tuesday's 'tantrum'

by MPA12 Mar 2015

By David Shirmeyer, CEO at Sigma Research

Compared to Tuesday the stock market was quiet yesterday,the bond and mortgage markets slightly better but nothing substantial and still bearish. Nothing occurred to affect markets.Today we get some key data with February retail; sales, the forecast is an increase of 0.5% and excluding auto and truck sales +0.5%.

December and January retail were quite soft, Jan down 0.8% and Dec down 0.9%. Today the U.S. Treasury will sell $13B of 30 yr bonds, re-opening the 30 issued last month; both the 3 and 10 have seen nice bidding. Weekly jobless claims thought to be down 11K to 309K; the Fed is convinced employment is off and running albeit Yellen fears the quality of jobs being created. Investors and Wall Street opinions though don’t give much thought to the poor low-paying jobs that make up the majority of new jobs.
Next Wednesday markets will have more insight about what the Fed is about to do with rates, or will they? After EVERY FOMC meeting markets spend days interpreting what the policy statement means, what the Fed is trying to say with convoluted Fedspeak, and the Fed will release its quarterly forecasts. Janet Yellen will try to add more Fedspeak with her press conference after the meeting.
Treasury found good demand for the 10 yr note auction Wednesday afternoon, re-opening the 10 yr issued last month. The rate 2.139%, bid/cover 2.65, indirect bidders (foreign central banks and large foreign investors) took over half of it 58.6%, direct bidders (domestic) took 10.2%. Last month’s 10 yr; 2.00%, bid/cover 2.62, indirects 59.5% and directs 12.7%. The averages on the last 12 auctions; 2.37%, cover 2.68%, indirects 47.7% and directs 13.2%. The reaction dropped the 10 yr to 2.11%.
The dollar had another strong day against the yen and euro currency; investors increasingly concerned about the effect on future earnings of businesses that market internationally. Make your vacation reservations for April in Paris now.
NFIB released the Small Business Economic Trends Wednesday morning. The optimism index increased a little, the number of planning to hire declined slightly. The more positive news; 29% of small business owners report that they have at least one job opening that they could not fill. That's the highest that number has been since March 2006, one of the highest numbers they've seen in 40 years. Look hard enough and we can find any kind of news you want, strong or not so good. Fed staff surely saw the report.
Someone on CNBC Wednesday afternoon referred to Tuesday’s stock market swoon as the markets having a tantrum over the Fed’s potential increase in rates. These days stock market bulls, and they are in the majority, don’t believe stocks should ever decline--hat-according to many, it isn’t American.
Nothing has changed,rate markets remain technically bearish, and we always pay more attention to market action rather than all of the commentary and opinions. MBS prices were better Wednesday afternoon than when prices were set t morning, up 18 bps frm 9:30; is it enough margin to float? Its marginal.