Treasuries and mortgages are fractionally better this morning but not much. Friday the 10-Year Note pushed through 1.90%, a key technical resistance level. Stock indexes in pre-market opening were trading weaker supporting the bond market. In Europe over the weekend Greece and France voted out the leadership that drove the massive austerity plans that have crippled Europe. France elected Francois Hollande and ousted Sarkozy; Sarkozy and Germany’s Angela Merkel were the architects of the severe cuts in spending in the debt riddled countries of Greece, Portugal, Ireland, Italy and Spain that has routed what was left of the economies and driven unemployment to depressionary levels. The results of the elections in the two countries came after a tumultuous few weeks that saw the Dutch government fall as Britain’s conservative led coalition took a whipping in local elections. Most analysts believe voters in Europe are in favor of balanced budgets and good fiscal governance but the spending cuts are too severe and too quick. Germany and France, especially Germany, have forced unemployment higher and dealt the euro economy into a very deep recession.
Here in the U.S. the stock market had a bad week last week and we expect additional selling this weekas investors are increasingly concerned valuations in many of the “hot” issues have become too expensive. Europe’s recession is slowing China and investors see recent U.S. data as evidence the U.S. will slow. That the U.S. will slow growth flies in the face of the most recent Federal Reserve forecasts. Last week the Federal Reserve raised its outlook for GDP growth this year and next compared to their outlook in January. Uncertainty is the word of the moment.
At 930am the DJIA opened down -46, NASDAQ down -13, S&P down -4; 10-Year Note up +2/32 at 1.87% while mortgage prices up 2/32 (.06 bps).
This week Treasury will auction $72B of notes and bonds; $32B of 3-Year Notes tomorrow, $24B of 10-Year Notes on Wednesday and $16B of 30-Year Bonds on Thursday. There isn’t much in the way of key economic releases this week. This afternoon at 300pm March Consumer Credit; it is one our favorite reports each month although there isn’t a lot reaction when it hits. Credit is expected to have increased $11.0B after +$8.7B inFebruary; our focus is on revolving credit (credit card usage) not so much on the headline. Consumer Credit has been surging the last six months driven by non-revolving credit, credit in large part that’s used to fund vehicle purchases. Revolving credit, which also turned higher late last year, has however been lagging and contracted slightly for a second month in a row.
