The Day Ahead: Several Housing-Related Reports; Tight Range Persists

By: Matthew Graham

After yesterday's quiet session, bond markets strengthened during Asian trading hours only to move weaker when Europe got involved.  Neither of the moves were very big and 10yr yields are set to hit the New York session less than 1bp higher than yesterday's 5pm level.  S&P futures are about 2 pts higher.

Whereas Monday's calendar of data and events was essentially empty, today's is appreciably busier.  Things get started at 9am with Case Shiller home prices.  An hour later, a trio of data hits: FHFA Home Prices, New Home Sales, and Consumer Confidence.  While the housing-related data (prices and sales) is expected to be slightly stronger than last time, Consumer Confidence is seen falling from 70.8 to 70.3.

Even if data deviates from previous readings by more than the expected amounts, it's hard to imagine that it would motivate any big moves in either direction with tomorrow's immensely more important events looming (FOMC Announcement, Bernanke Press Conference, FOMC Forecasts, 5yr TSY Auction).  Today's 2yr auction at 1pm isn't a major consideration.

Even if bond markets begin to move more aggressively than we think they should before tomorrow, the technical framework seems to offer some logical boundaries.  Using 10yr yields as a proxy for "the bond market," we generally see recent movement as indicated by the chart below.  After breaking back into the previous horizontal range in early April, we've been trading slightly lower in yield in a narrow trend channel.  There's major support at the upper red line (around 2.06) and minor support along the upper teal line.  On the bullish side, the lower red and teal lines offer resistance to further gains.  The bottom line is this: whereas events today and tomorrow morning have the power to move things around within the teal range (and possibly test its boundaries), Wednesday afternoon's FOMC-related events have the power to move things around within the red lines (and even more possibly test their boundaries).

 

MBS Live Econ Calendar:

Week Of Mon, Apr 23 2012 - Fri, Apr 27 2012

Time

Event

Period

Unit

Forecast

Prior

Actual

Tue, Apr 24

09:00

CaseShiller 20 mm SA

Feb

%

+0.2

0.0

--

09:00

CaseShiller 20 mm nsa

Feb

%

-0.6

-0.8

--

09:00

CaseShiller 20 yy

Feb

%

-3.4

-3.8

--

10:00

Monthly Home Price mm

Feb

%

--

0.0

--

10:00

New home sales-units mm

Mar

ml

.320

.313

--

10:00

Consumer confidence

Apr

--

70.3

70.8

--

13:00

2-Yr Note Auction

--

bl

35.0

--

--

Wed, Apr 25

07:00

Mortgage market index

w/e

--

--

725.4

--

07:00

Mortgage refinance index

w/e

--

--

3936.3

--

08:30

Durable goods

Mar

%

-1.5

+2.4

--

11:30

5-Yr Treasury Acution

--

bl

35.0

--

--

12:30

FOMC rate decision

no policy chng expected. all about verbiage

14:00

FOMC Member Forecasts

 

14:15

Bernanke Press Conference

will press "press" for QE clarity? Probably

Thu, Apr 26

08:30

Initial Jobless Claims

w/e

k

375k

386k

--

08:30

Continued jobless claims

w/e

ml

3.29

3.297

--

10:00

Pending sales change mm

Mar

%

+1.0

-0.5

--

13:00

7-Yr Note Auction

--

bl

29.0

--

--

Fri, Apr 27

08:30

GDP (Q1 2011 – Advance)

Q1

%

+2.5

+3.0

--

09:55

U.Mich sentiment

Apr

--

75.7

75.7

--

09:55

U Mich conditions

Apr

--

81.0

80.6

--

09:55

U.Mich expectation

Apr

--

72.5

72.5

--

mm: month over month | yy: year over year | qq: quarter over quarter

 (n)SA: (non) Seasonally Adjusted