Treasuries and mortgages opened unchanged this morning with no news. Greece still can’t finalize anything on their debt workout. It’s been three weeks and counting since Greek officials said they were close to an agreement with creditors. Last week’s January Employment Report was much better than even the most optimistic forecasts and counter to the pessimistic outlook delivered from the Federal Reserve at the conclusion of the Jan 25th FOMC meeting. Not only was the employment data stronger but the two ISM reports for January (Manufacturing and Service Sector) were better than what had been expected.
European bank supervisors may discuss easing requirements for lenders to hold capital against sovereign debt this week as part of more than 30 meetings this month to track banks’ progress in complying with updated requirements, two people with knowledge of the discussions said. After three weeks of discussions and nothing coming from it, Fitch said a Greek disorderly default “cannot be wholly discounted.” “Fitch expects Greece to undertake an orderly debt restructuring, which would ensure that a payment system is in place,” the ratings company said in a statement today. “However, a disorderly default, which may include an exit from the euro zone, cannot be wholly discounted.” European leaders stepped up pressure on Greek politicians to accept the conditions for a 130 billion-euro ($171 billion) bailout, saying time was running out.
Today we have no scheduled reports. This week the economic calendar doesn’t offer much. The Treasury will auction $72B of notes and bonds this week beginning tomorrow through Thursday.
At 930am the DJIA opened down -60, the 10-Year Note down -3/32 to 1.94% (+1.5%) and mortgage prices up +1/32 (.03 bp). Treasuries facing auctions this week are hanging back with yields unchanged after Friday’s drumming over the Jan employment report.
This Week’s Economic Calendar:
01/07/12: 0100pm $32B 3-Year Note Auction
0300pm December Consumer Credit (+$8.5B, +$20.4B in November)
01/08/12: 0700am MBA mortgage Applications
0100pm $24B 10-Year Note Auction
01/09/12: 0830am Weekly Jobless Claims (+3K to 370K; continuing claims 3.475 mil from 3.437 mil)
10:00am December Wholesale Inventories (+0.4%)
0100pm $16B 30-Year Bond Auction
01/10/12: 0830am December Trade Balance (-$48.2B)
0955am University of Michigan Consumer Sentiment Index (74.0 from 75.0)
0200pm January Treasury Budget (-$40.0B)
Treasuries continue to weaken this morning. After opening slightly better the 10-Year Note at 1000am was down -4/32 at 1.94% (+1.5%) with MBS trade down -1/32 (.03 bp) at 1000am. Technically still positive but softening now. As we have noted countless times, the 10Year Note struggles when it falls below 2.00%, mortgage rates remain subject to treasuries and also have demonstrated an inability to fall when at the present levels. Safe haven to treasuries has waned even with the potential of Greece deflating. Traders don’t believe Greece will default even with nothing being finalized for weeks and the clock ticking for Greece to make its next payment next month.
