The Day Ahead: Existing Home Sales, $35 Billion 5s, Fed Speak

Equity futures are rebounding after anti-government riots in oil-rich Libya initiated the worst single-day sell-off since August yesterday. As stocks recover, safe-haven assets are retracing some of yesterday’s gains.

Profit takers pushed benchmark interest rates slightly higher in light overnight trading last night after a "flight to safety" poured into the government bond market yesterday. The 10-year Treasury note is -6/32 at 3.483%, giving up a bit after firming 13 basis points to 3.46% on Tuesday. The US$ index is down 33 basis points to 77.44.  The 2s/10s yield curve is 5bps flatter at 272bps wide. The FNCL 4.5 production MBS coupon is -2/32 at 101-11.

S&P 500 futures are up 3.00 points to 1,317.50 and Dow futures are trading 27 points higher at 12,2210. Yesterday, the S&P shed 2.05% (25.6 points) and the Dow lost 1.44% (178.5 points). 

Oil prices remain near two-and-a-half year highs, with light crude up for the fifth straight session at $96.07 per barrel, or 0.68% up on the day. Gold prices are 0.27% higher at $1,403.09 per ounce ― roughly 6% up on the month.

Just in, the MBA Mortgage Applications Survey advanced 13.2% in the week ending Feb 18. 

Refinancings increased 17.8% in the week while purchases jumped 5.1% as the average 30-year fixed-rate mortgage contract decreased to 5% percent from 5.12%.

“Ongoing turmoil in the Middle East brought interest rates lower last week,” said MBA. “Borrowers took advantage of these lower rates, bringing application activity back near levels from two weeks ago, following sharp declines last week.”

Key Events Today:

10:00 ― Existing Home Sales surprised the market last month when the December index jumped 12.3%, pushing the annualized pace beyond the 5 million mark for the first time since June 2010. Single family home sales rose 11.8%, multifamily home sales climbed 16.4%, and double-digit gains were seen in all four geographic regions. Also, inventory fell from to 8.1 months’ supply from 9.5 months one month before.

The January index looks likely to retrace a bit. Economists look for an annualized pace at 5.25 million, down from 5.28 million, with forecasts ranging from 5 million to 5.39 million.

“December's one-month increase of 580k, reaching a seasonally-adjusted annualized rate of 5.28 million existing home sales, will likely decline to 5.06 million,” said economists at Nomura Global Economics. “However, the anticipated decline is not an expression of doubt over existing home sales activity; in fact, an annualized rate of 5.06 million is still some 200k greater than the 3-month average.”

10:15 ― The Fed will purchase an estimated $1.5 to 2.5 billion in Treasuries maturing between 08/15/2028 and 02/15/2041

11:00 ― Charles Plosser, president of the Philadelphia Federal Reserve, speaks on the economic outlook to the Rotary Club of Birmingham, Alabama.

12:30 ― Thomas Hoenig, president of the Kansas Fed, speaks to the Women in Housing & Finance in Washington.

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