The Day Ahead: Bernanke, $24 Billion 10s, GSE Reform Hearing
Treasury yields weakened overnight with the benchmark 10-year note trading in a range between 3.71% to 3.77%, versus the Tuesday close at 3.72%. Treasuries have weakened in the past seven sessions as money continues to flow into equities. Analysts at Thomson Reuters called the weakening “sensible enough” considering the 10-year auction at 1pm today.
"We have yet to see all out snowball selling in the bond market but we've definitely noticed hedgers preparing for a potential shift in duration bias. This should make rate watchers nervous. We're teetering on another sharp move higher in mortgage rates" added MND's Adam Quinones.
The 10-year Treasury note is currently attempting a modest recovery bounce with a 6/32 gain to 91-05 yielding 3.711% (-2.6bps). The FNCL 4.5 is +3/32 at 100-03,
Equities are being pulled downwards this morning, threatening to break the longest winning streak ― seven days ― in more than six months. S&P 500 futures are down 5.50 points to 1,316.25 and Dow futures are 23 points lower at 12,173. On Tuesday, the Dow crossed the 12,200 mark for the first time since June 2008.
Commodity prices are rising. Light crude oil is trading 0.39% higher at $87.27, while gold prices are 0.07% higher at $1,365.
Just in, the MBA Mortgage Applications decreased 5.5% in the week ending Feb 4. Refinancings fell 7.7% in the week while purchases declined 1.4% and are 16.6% lower than this time last year. MBA’s Michael Fratantoni blamed the dual declines on mortgage rates, as the 30-year fixed rate average jumped 32 basis points to 5.13% ― the highest since last April.
“Mortgage rates increased last week as many incoming economic indicators continue to show stronger growth than had been anticipated,” he said. “Refinance volume continues to be low, as fewer homeowners with equity have any incentive to refinance. We are at the beginning of the spring buying season, but purchase volume remains weak on a seasonally adjusted basis.”
Key Events Today:
8:30 ― Tim Geithner, U.S. Treasury secretary, speaks at The Atlantic's town hall event on building the economy and the future of jobs. Speech is called “Finding Work, Finding Our Way.”
10:00 ― Ben Bernanke, chairman of the Federal Reserve, testifies for the first time in front of the Republican-led House Budget Committee.
Economists at IHS Global Insight said the chances of hearing fresh insight from Bernanke are slim, even if Republicans press the chairman on Fed policy.
“The House Committee may well attempt to prod the Chairman in terms of options on dealing with the budget deficit and federal debt situation, but Bernanke has skillfully skated around this topic in the past,” they said. “So it is not clear at this point what the purpose of the out-of-cycle testimony will be, other than a ‘get to know you better’ with the new Republican Budget committee leadership.”
10:15 ― The Federal Reserve will purchase an estimated $6-8 billion in Treasury coupons maturing between 2/15/2015 and 7/31/2016
1:00 ― Treasury auctions $24 billion 10-year notes
2:00 ― The House Financial Services Subcommittee on Capital Markets and the GSEs holds a hearing on GSE reform
6:45pm ― Dennis Lockhart, president of the Atlanta Fed, speaks to the CFA Society in Atlanta.