Early this morning the 10-Year Note and mortgages opened a little weaker. Italy’s auctions didn’t do as well today as the shorter-term auctions did yesterday. Italian 10-Year Bonds fell, pushing yields toward the highest this month, after the nation raised less than its maximum target at an auction of debt due between 2014 and 2022. Portuguese and Spanish securities also declined and the euro weakened to a 15-month low against the dollar after Italy agreed to pay a yield of 6.98% on securities maturing in 2022, close to the 7% level that prompted euro-area peers to seek bailouts. The Italian 10-Year Bond after the auction is trading over 7.00% at 7.07%.
Italy did sell its debt offerings, a good thing, but the rate was higher than thought and in after market trade the rate is now above 7.00% that markets have set as a benchmark for its 10-Year debt offerings. The reaction has been muted so far this morning, except in the currency market where the euro currency continued to decline to the weakest level since September 2010 against the dollar, and the weakest against the yen in 10 yrs.
At 830am Weekly Jobless Claims were expected to be up 4K, as reported claims increased 15K to 381K. Continuing claims also increased, to 3.601 million from 3.567 million the week before. The 4-week average, a smoother look at claims was 375,000 down from 380,750. Claims still declining even with the increase but there was no noticeable reaction to the report in either stocks or interest rates.
At 930am the DJIA opened up +30, the 10-Year Note was unchanged and mortgage prices were down -2/32 (.06 bp).
The last key economic report of this year at 945am is the December Chicago Purchasing Managers Index. In November the index hit a recent high at 62.6. The index was expected to have declined in December to 60.1. As reported the index hit at 62.5 from a revised 62.6 in November; New Orders index at 68 from 702, Prices Paid at 65.7 frpm 60.2 and Employment at 58.6 from 56.9 (any index over 50 is considered expansion). There was little to no reaction to the data.
At 1000am the NAR reported November Pending Home Sales (contracts signed but no yet closed), expected up 0.6%.
The rest of the day bonds and mortgages will track equities. The stock market is holding a gain of about 65 points at 1000am. Trade should be contained through the rest of the session. Technically, the U.S. 10-Year Note escaped from breaking down yesterday with the rally that returned the 10-Year Note below 2.00%. If equity markets were to fall the 10-Year Note and mortgages will improve, but not much.
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