The Day Ahead: Jobless Claims, Existing Home Sales, Treasury Auction Terms
Interest rates are holding near yesterday's lows as equity futures traded lower in the overnight session following news that Ireland’s GDP fell at an annualized rate of 4.8% in the second quarter.
Just over one hour before the opening bell, S&P 500 futures are 8.5 points lower at 1,121.25 and Dow futures are 57 points weaker at 10,616.
The 10-year Treasury note is +0-07 at 100-26 yielding 2.531%. The 2s/10s yield curve is 1bp flatter at 211bps. The November FNCL 4.0 is UNCH at 102-21. This is a key price support level for the FN 4.0.
Light crude oil is 0.91% lower at $74.03 per barrel, while gold prices ― which rose for a fifth day yesterday to nominal record highs ― are 0.13% lower at $1,287.80
Plenty of new economic data will keep investors busy this morning. In addition, investors may also be watching for headlines from President Obama’s meeting with China’s Premier Wen Jiabao.
“The war of words … and tariffs…..has already begun between the two countries,” noted economists at BMO Capital Markets, who said the war “escalated this week, with the U.S. accusing China of not doing enough to allow the CNY to appreciate, and China retorting that to criticize the CNY was ‘unwise and also near-sighted.’”
Key Events Today:
8:30 ― Weekly Jobless Claims, a closely-watched measure of how many Americans are filing for first-time unemployment benefits, have averaged 452k in the first two weeks of September, versus 487k in August (incl. 504k in the period ending Aug. 14) and 459k in July. Economists look for more of the same in this week, with the consensus of estimates at 450k. Such a figure arguably points to some job private job creation in the economy, but certainly not a robust level.
“Initial claims marked a small decline to 450k in the week of 10 September from 453k previously and 478k two weeks before,” said economists at Nomura, noting this suggests “the pace of lay-offs may be slowing.”
10:00 ― The good news is that nobody is expecting Existing Home Sales to continue tumbling in August. The bad news is that even a decent sized uptick will do little justice to the market after the 27.2% plummet in July. The current annual pace of sales is just 3.83 million, a 15-year low. Economists are anticipating that rate to move up to 4.050 million in August, with estimates ranging between 3.87 million 4.6 million.
At the top of the range are economists from Nomura, who believe the post-tax credit payback is over. But, they concede that pending home sales “showed only moderate growth in July, suggesting a downside risk to our forecast.”
Economists at BTMU said single-family home sales have reset at levels far below expected because the tax credit pushed sales forward more than thought. On top of that, “the economic environment remains sour for home-buying no matter how low interest rates have fallen,” they added. “In fact, low interest rates have instead spurred a refinancing frenzy, and while that still helps households lower debt levels, it does nothing to boost sales.”
10:00 ― The Leading Economic Indicators index, a composite measure that seeks to gauge broad turning points in the economy, is anticipated to move upward by just 0.1% for the second month in a row. The index has been wavering in recent months, falling twice in the past four months after saw 12 consecutive increases before that.
Economists at Nomura look for a slightly better 0.2% gain. “Although longer-term treasury yields dropped a bit during the month, the largest contribution should come from the spread between long- and short-term interest rates,” they said.
10:40 ― Charles Evans, president of the Chicago Federal Reserve, opens the two-day International Banking Conference in Chicago.
1:00 ― Paul Volcker, chairman of the President Obama’s Economic Recovery Advisory Board, speaks at the two-day International Banking Conference sponsored by the Chicago Federal Reserve Bank and the IMF.
ISSUANCE
* 11:00 Treasury announces 3- and 6-month bills
* 11:00 Treasury announce 2-, 5- and 7-year notes
* TBD Fannie Mae note announcement
* Gannett, $500m 2-part 250m 5s, 250m 8s [guidance 6.5-6.75%(5s);7.25%-7.5%]; JPM/Citi/Barc/UFJ/Miz/STRH/USB
* BCI, roadshow this week; BNP/JPM
* Gerdau, benchmark 10-year [guidance 6% area]; HSBC/Santander
* KTZ, deal expected following roadshow; Barc/HSBC/RBS
* Kepco, $500-$750m 5 or 5.5-year; BAML/BARC/CS/GS/MS
* Interbank, $400m+ 10-year expected next week; BAML/JPM
* Hyundai Cap Am, benchmark bond expected; Barc/Citi/HSBC/JPM