Quiet but weak start today in the bond and mortgage markets. Europe’s stock markets are better except for the U.K. with its index down slightly. This week is likely to have thin trading with the holiday and an early close in the bond market on Friday. Although there are a number of key economic reports (mostly November Housing), the Treasury will auction $99 billion of notes and Europe has a self-imposed deadline today for drawing additional aid to the debt crisis and to form new budget rules. Trade should be quietly unchanged by the end of the week. That said, if there is any significant change in the bond and stock markets it will be triggered by events in Europe. Euro-area officials aim to meet their deadline for toady to arrange the I.M.F. loans. The package entails about 150 billion euros pledged by euro-area central banks and another 50 billion euros to be contributed by non-euro E.U. states.
At 930am the Dow Jones Industrial Average (DJIA) opened up +27, the 10-Year Note traded down -3/32 andmortgage prices were down -3/32.
The only scheduled data today, December NAHB Housing Market Index was expected at 20, increased to 21 from 19 in November. Single Family Index was at 22 from 20, Next 6-Months Index increased to 26 from 25 (50 is the pivot for the indexes, above = expansion, below = contraction).
At 100pm the Treasury will auction $35 billion of 2-year Notes, likely it will be strongly bid as have been most Treasury Auctions recently. The death of Kim Jun Il in North Korea should add more to the demand for U.S. debt.
This Week’s Economic Calendar:
11/19/11: 1000am – December NAHB Housing Market Index.
0100pm – $35 billion 2-Year Note Auction.
11/20/11: 0830am – November Housing Starts and Permits (starts -0.8%, permits -2.8%).
0100pm – $35 billion 5-Year Note Auction.
11/21/11: 0700am – MBA mortgage Applications.
1000am – November Existing Home Sales (+2.2%).
0100pm – $29 billion 7-Year Note Auction.
11/22/11: 0830am – Weekly Jobless Claims (+14k to 380k).
- Q3 Final GDP (+2.0%, unchanged from Preliminary Report last Month).
0955am – University of Michigan Consumer Sentiment Index (68.0 from 67.7).
1000am – November Leading Economic Indicators (+0.3%).
- FHFA October Price Index (+0.3%).
11/23/11: 0830am – November Durable Goods Orders (+0.2% excluding transportation orders +0.3%).
- November Personal Income and Spending (income +0.2%, spending +0.3%).
1000am – Novemeber Home Sales (+1.9%).
Last week the 10-Year Note yield declined 25 bps, mortgage prices down 10 bps. Technically the bond market has improved while the MBS market still holding nicely, is being propped up by treasuries. Europe is still the key driver for lower U.S. rates on movements into the U.S. dollar through safety into treasuries. The low yield on the 10-Year Note occurred in September at 1.70% when Europe’s debt problems infected Italy and Spain. Whether yields will get back to the historic lows depends on what happens in Europe and that’s difficult to handicap. There has been nothing bu talk an plans but so far no progress to head off defaults or anything that pulls the region back from the cliff edge.
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