The Day Ahead: Case-Shiller HPI, Consumer Confidence, $35 Billion 5s Offered

Benchmark interest rates are holding onto yesterday's post-auction bond market rally even as equity futures rally toward new two-year highs. This comes ahead of home price and consumer confidence data later this morning.

Seventy minutes before the opening bell, the 10yr TSY note is -1/32 at 94-03 yielding 3.331% while the Fannie Mae 4.5 MBS coupon is -2/32 at 102-00. S&P 500 futures are 2.00 points up at 1,255.25. The market was mixed yesterday amid light trading ― according to CNN, it was the lightest trading day of the year.  Today should be more of the same unless the two data reports bring in unexpected news. Since Dec. 1, the S&P has climbed 6.52%.

Commodity prices are also rising this morning with light crude oil trading 0.42% higher at $91.38 per barrel and gold prices 1.52% up at $1,404.60 per ounce.

Key Events Today:

9:00 ― The S&P Case-Shiller Home Price Index showed that housing prices in the 20 metropolitan areas covered were just 0.5% above levels from last year. Nineteen of the 20 areas saw declines in the September index, with average prices sliding 0.8%. Economists expect prices to fall another 0.6% in October, marking the fourth straight decline.  Prices are already 28.6% below their July 2006 peak.

“The 20-city composite house price index hit an 18-month high in June but has declined about 1.5% over the last three months,” noted economists at Nomura Global Economics. “Declines in the median prices of both new and existing homes sold in October suggest the Case-Shiller index is likely to be down for fourth straight month.”

Economists at BBVA point out that prices are now both low and stable, “amounting to an attractive environment for potential home buyers.”  They said home prices are “expected to remain low but stable in the near future.”

10:00 ― Economists anticipate the Conference Board’s Consumer Confidence index to increase two points to 56.1 in December. A month before, the index jumped to the highest level since June. A gain this month would be the third straight one, but economists at BBVA point out we’re far away from the historical average of 94.7. 

“Despite higher gasoline prices and a weak housing market, consumers are becoming more optimistic thanks to a rising stock market and relatively good news on the employment and income front,” said economists at IHS Global Insight. “Renewed consumer optimism, unleashing of pent-up demand, and heavy price discounting by retailers are encouraging strong holiday retail sales.”

10:15 ― Fed buys $6-8 billion in Treasuries maturing between 6/30/2013 and 11/30/2014

1:00 ― Treasury auctions $35 billion 5-year notes