Lots of Econ Data. Not Much of a Difference in MBS Levels
Lots of data to recap this morning and lots of drama to digest from yesterday. Most important to read is YESTERDAY'S MBS CLOSE!
Beyond that, not much has changed overnight as MBS and treasuries both sit at similar levels to yesterday's worst, although MBS was weaker by comparison earlier on this morning wheras treasuries are catching up now. To illustrate that, here's a look at the two overlaid on the same chart. Treasury yields y-axis is inverted to better illustrate how they are moving relative to each other.
Reuters Quick Recaps Of Economic Data This AM
HOUSING STARTS
- US NOV HOUSING STARTS +3.9 PCT VS OCT -11.1 PCT (PREV -11.7 PCT)
- US NOV HOUSING STARTS 555,000 UNIT RATE (CONSENSUS 550,000) VS OCT 534,000 (PREV 519,000)
- US NOV HOUSING PERMITS -4.0 PCT VS OCT +0.9 PCT (PREV +0.9 PCT)
- US NOV PERMITS 530,000 UNIT RATE (CONSENSUS 560,000) VS OCT 552,000 (PREV 552,000)
- US NOV HOUSING COMPLETIONS -14.1 PCT TO RECORD LOW 513,000 UNIT RATE VS OCT 597,000
- US NOV HOUSING PERMITS RATE LOWEST SINCE APRIL 2009 (523,000 UNITS)
JOBLESS CLAIMS
- US JOBLESS CLAIMS FELL TO 420,000 DEC 11 WEEK (CONSENSUS 420,000) FROM 423,000 PRIOR WEEK (PREVIOUS 421,000)
- US JOBLESS CLAIMS 4-WK AVG FELL TO 422,750 DEC 11 WEEK FROM 428,000 PRIOR WEEK (PREVIOUS 427,500)
- US CONTINUED CLAIMS ROSE TO 4.135 MLN (CON. 4.070 MLN) DEC 4 WEEK FROM 4.113 MLN PRIOR WEEK (PREV 4.086 MLN)
- US INSURED UNEMPLOYMENT RATE UNCHANGED AT 3.3 PCT DEC 4 WEEK; NOV 27 WEEK PREVIOUSLY REPORTED AS 3.2 PCT
- US JOBLESS CLAIMS 4-WK AVG LOWEST SINCE AUG 2, 2008 WEEK (419,000)
PHILLY FED SURVEY
- BUSINESS CONDITIONS DECEMBER 24.3 VS NOV 22.5
- BUSINESS CONDITIONS INDEX AT HIGHEST SINCE APRIL 2005
- NEW ORDERS INDEX AT HIGHEST SINCE FEBRUARY 2010
- 6-MONTH BUSINESS CONDITIONS INDEX AT HIGHEST SINCE MARCH 2010
When bonds move as much as they have recently, I like to sit and stare at long term charts for days at a time. Here's some material for you, should you want to do the same (remember to eat!).
Observation: 97-00 has come into play more that a few times for 4.0's. This market is oversold. Market looks like early to mid-2009, but many conditions are very different. Still hoping for at least an INITIALLY SIMILAR correction to summer of 2009, even if we're unlikely to make similar shapes to fall 09 assuming economy stays on track. (big IF there...)
Observation: 3.50 is even more heavily technical than MBS. Market looks oversold. Yields look to be trending upward long term. Market looks oversold. Wondering what stocks look like over a similarly long time frame.
Observations
- Bonds (in yellow) leading stocks down (relative to each other) way before the climax of the crisis.
- Stocks respond first, bonds follow and lead stocks by about 3 months as far as "finding the bottom"
- Period of relative calm and stability in which both trend together with narrow ranges and little divergence
- Stocks have basically kept on going with the previously stable uptrend despite a little hiccup that could even be chalked up to "sell in may and go away." But bonds look like they got head-faked. something "spooked" yields that far away relative to stocks? Sure, we have lots to consider there, but which market is telling the truth? The risk is that bonds priced in too much economic uncertainty and now get dragged back toward stocks' directionality.