MBS UPDATE: ECON AND LONG BOND THOUGHTS
The stack is trading in a tight range as TSY yields in the belly of the curve move marginally lower. MBS is a few ticks wider to TSYs.
The TSY will auction off $11bn 30yr bonds at 1pm. Historically..a bid-to-cover around 2.10 would be considered average with a post auction tail in the 1.5bps range. Currently the long bond is trading slightly higher to 3.66. Not expecting this auction to have much affect on MBS.
Morning Econ...
Initial Jobless Claims
In the week ending March 7, the advance figure for seasonally adjusted initial claims was 654,000, an increase of 9,000 from the previous week's revised figure of 645,000.
The 4-week moving average was 650,000, an increase of 6,750 from the previous week's revised average of 643,250.
Continuing Claims
The advance number for seasonally adjusted insured unemployment during the week ending Feb. 28 was 5,317,000, an increase of 193,000 from the preceding week's revised level of 5,124,000.
The 4-week moving average was 5,139,750, an increase of 124,250 from the preceding week's revised average of 5,015,500.
The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 4.533 million.
Jobless Claims continue to rise and Continuing Claims maintain their upward momentum.
The largest increases in initial claims for the week ending Feb. 28 were in New York (+16,481), California (+7,765), Oregon (+4,001), Georgia (+3,313), and Wisconsin (+3,006), while the largest decreases were in Missouri (-3,350), Massachusetts (-3,263), New Jersey (-1,973), Florida (-1,559), and New Mexico (-1,005).
The market is feeling optimistic that the worst is behind us but the 4 week moving average of jobless claims has risen for seven straight weeks and continuing claims hit another record high.
Market participants ended up finding their source of speculative solace in the Retail Sales data...
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February were $346.8 billion, a decrease of 0.1 percent (±0.5%)* from the previous month and 8.6 percent (±0.7%) below February 2008.
Retail trade sales were down 0.1 percent (±0.7%)* from January 2009 and 9.8 percent (±0.7%) below last year.
Here is why the market is feeling optimistic...Gasoline Sales were considerably higher but that wasn't the only reason behind the increase in monthly sales. Check out what other sectors experienced gains...
Considering the drop in domestic price level....current retail sales activity is still at 70 year lows. The two month uptrend should not be considered a sign of macroeconomic bottom just yet...especially given the post-Christmas bargain buyer friendly retail sales environment.
Day traders will however continue to take advantage of any opportunity to ride a wave of optimism. Given the current status of labor markets I remain doubtful this uptrend in retail sales will continue. Keep an eye stock markets today....bonds are moving lower while equites move higher...odd occurence lately. Anyone shorting stocks again?