Prior to 830am data the 10-Year Note and mortgage prices were unchanged. At 830am there were three data points:Weekly Jobless Claims were expected to be about unchanged but reported claims were up 13K to 380K and last week’s claims were revised from 357K to 367K. Continuing claims were down 98K to 3.251 million. Claims were much higher than thought but the caveat is being explained by the Easter week that distorted the claims data. It has always amazed most that economists and analysts that come up with forecasts and estimates don’t seem to take holidays into their estimates until after the data is reported then we have excuses. That said, it is what it is.
March Producer Price Index (PPI) was thought to be up +0.3% overall and up +0.2% for the core (excluding food and energy). As reported the overall PPI was unchanged and the core jumped 0.3%. Year-to-year overall the PPI is up +2.8%, year-to-year core up +2.9%. The headline implies that inflation is a little hotter than what the Fed pegs as its acceptable target of 2.5%. Looking into it, we find that the increase in the core PPI was mostly due to light truck prices increasing in March.
The February International Trade Deficit was expected down -$52B but the deficit reported was down -$46.03B.
The focus this morning on the 830am data is about the increase in Jobless Claims,although Easter holiday week may have distorted the data somewhat. The jump in the core PPI has been dismissed due to the increase in light truck prices. Inflation isn’t much of an immediate issue now. Janet Yellen, Vice Chair at the Fed commented, “I consider a highly accommodative policy stance to be appropriate in present circumstances.” She also said that allowing the Fed’s program to extend the maturity of the assets on its balance sheet to expire in June wouldn’t amount to a policy tightening. She agrees with Bernanke by saying unemployment will decline “only gradually.” “Over the next several years, I anticipate that we will fall far short in achieving our maximum employment objective, “Yellen said. Still, “considerable uncertainty surrounds the outlook, and I remain prepared to adjust my policy views in response to incoming information.”
At 930am the DJIA opened up +20, 10-Year Note at 2.02% (-1 bps) with MBS prices up +4/32 (.12 bps).
At 100pm this afternoon the Treasury will complete its auctions with $13B of 30-Year Bonds, re-opening the bond issued in February. The 10-Year Note yesterday and the 3-Year Note auction on Tuesday were both OK but were not met with very strong demand, Today’s 30-Year Bond auction will likely be the same, not too cool but not too hot, just right.
Treasuries and mortgages are being trumped a little so far this morning by the stock market. The stock market has ignored the increase in Jobless Claims so far, the DJIA opened up +20 but since then the index as well as the NASDAQ and S&P indexes are gaining ground. The mortgage market was +4/32 (.12 bps) at 930am, at 1000am were up +1/32 (.03 bps). The 10-Year Note, driver for mortgage markets was up +4/32 at 930am but now is up just +1/32. The wider outlook is bullish for the bond and mortgagemarkets, however the 10-Year Note has found resistance at 2.00% levels. The idea of another easing move from the Fed is still out there but the recent swift decline in yields after the weak March Employment Report may have already discounted the easing move; and there is still a lot of analysts and traders holding that the Fed will not ease any time soon.
