Market Snapshot 11/17/2011

Before the 8:30 data this morning the 10 yr note traded at 1.97%, after the 8:30 economic reports the 10 yr back to 2.03% at 9:00 am. Weekly jobless claims were down 5K to 388K last week, estimates were for an increase of 5K to 10K. Weekly claims last week were revised to 393K frm 390K originally reported. The claims lowest since April 2nd 2011. Continuing claims fell to 3.608 mil frm 3.665 mil. Oct housing starts and permits also at 8:30; starts were expected to be down 8.0% as reported -0.3% at 628K. Sept starts revised lower to +7.7% frm +15.0%. Single family starts up 3.9% while multi-family starts -8.3%. Permits up 10.9% to 653K the best since March 2010. The two reports turned stock indexes frm weaker to better, at 9:00 the DJIA +40 after being off 50.

In Europe more talk but nothing of substance in terms of progress. Now France and Germany squabbling;  Germany's Angela Merkel rejected French calls to deploy the European Central Bank as a crisis backstop, defying global leaders and investors calling for more urgent action to halt the turmoil. ECB itself has also resisted calls to provide more support. Mario Draghi, the Italian who took over as president of the central bank this month, said Nov. 3 that backstopping government borrowing lies outside the ECB’s responsibility. The spread between French and German 10-year yields widened to as much as 204 basis points today as France sold 6.98 billion euros ($9.38 billion) of notes. Spanish bonds sank, driving 10- year yields to the highest since the euro was introduced in 1999, as borrowing costs climbed to the most in at least seven years at an auction of securities. The ECB said to be buying more Italian debt today after buying yesterday; the Italian 10 yr traded above 7.00% early this morning triggering some safe haven buying in US treasuries, now at 6.95% and the US 10 yr back over 2.00%.

At 9:30 the DJIA opened -13, 10 yr 2.02% +2 bp and mortgage prices -3/32 (.09 bp) frm yesterday's close.

At 10:00 a few minutes ago the key Nov Philadelphia Fed business index, expected at 9.0 frm 8.7 in Oct, earlier this week the index was expected at 6.8. As released the index was weaker at 3.6, prices pd component 22.8 frm 20.0, new orders 1.3 frm 7.8, employment component 12.0 frm 1.4. Employment better but new orders and the overall index weaker than expected. There isn't much initial reaction to the report. An index above zero is considered expansion, below zero, contraction.

The 10 yr and mortgage markets continue to trade in very tight ranges, two weeks with little change. Early today the 10 traded at 1.97%, at 10:00 back to 2.00%. Two factors for US rates; Europe and the US equity markets. Stock indexes turned up at 10:05 this morning and immediately the mtg market slipped a little. We still have somewhat positive technicals but overall the recent activity is neural with little changes.