Prior to 8:00 this
morning the US stock indexes were weak and the 10 yr note rate was down 2
bps from yesterday’s close, then news out of Russia changed markets. The stock indexes were pointing to a soft open, the DJIA
swung from -20 to up 62 in less than 30 minutes. Putin made a speech to
both houses of parliament saying that Russia isn't seeking "a
partition of Ukraine" and would defend the interests of Russian
speakers in the country by "diplomatic and legal means". The
slightly less aggressive comments bolstered US and Europe’s stock markets
as fears of a military intervention in Ukraine has ebbed for the moment.
“We don’t want to split up Ukraine, we don’t need that,” Putin said in a
speech to parliament. “Don’t believe those who scare you with Russia, who
yell that Crimea will be followed by other regions.”
At 8:30 the Feb CPI data was right on estimates; the overall CPI up
0.1% as was the core; yr/yr overall CPI +1.1% while the core yr/yr +1.6%,
both well under the Fed’s 2.5% target that Bernanke and now Yellen want to
see occur. Inflation is nowhere on the radar and not a worry point for markets
at this time, although there are a number of economists that believe
inflation will take off later as the Fed begins increasing interest rates.
The Fed prefers a different measure of inflation, the price index for
personal consumption expenditures. That gauge showed prices up 1.2% in
January from a year earlier, according to the Commerce Department. More
than half the minor increase came from food prices that were up 0.4%.
Feb housing starts
fell 0.2% against estimates of an increase of 3.3% but the decline is because Jan starts were revised from
880K units to 909K units; Jan starts were down 11.2%. Feb building permits
increased 7.7%, better than estimates, to 1.02 mil, the strongest increase
since last October. Single-family starts rose 0.3% in February. That was
the first increase in the category since November. Builders also reported a
shortage of skilled workers and available land in a National Association of
Home Builders survey, released yesterday. The NAHB confidence measure
reflected poor market conditions for the second straight month in March.
Foreign investors
in January, after selling US debt in Dec were back to buying. In Dec foreign capital investments fell $45.5B when the Fed
began tapering; January saw inflows of $7.3B. Chinese holdings of US
Treasuries, which declined sharply in December, rose nearly $15B in January
to $1.28 trillion. Japanese holdings were little changed at $1.18 trillion.
The US relies heavily on China and Japan buying to continue to fund the US
deficit.
At 9:30 the DJIA opened 23 points better, NASDAQ +5, S&P +2; 10
yr note 2.70% unch and 30 yr MBS price +2 bps from yesterday’s close.
The Russian/Crimea
situation and fears of Russia wanting to move against Ukraine have not
materialized and presently look well contained. As noted last week, unless bullets were flying the entire
event would not last long in terms of financial markets. The rest of today
should be rather quiet ahead of the FOMC policy statement tomorrow
afternoon. The meeting is starting now and will conclude tomorrow afternoon
with the Fed announcing another $10B of tapering of purchase of treasuries
and MBSs. The policy statement will tout the continued improvement of the
economy while still worrying over employment and the low quality of jobs
being created; Janet Yellen will hold her first press conference after the
meeting.
Still no
sustaining movement in the bond and mortgage markets. The 10 is well positioned between 2.70% and 2.80% with a
few forays below 2.70% but with no sustainability. The same can be seen on
the MBS charts. Treasuries continue to hold a minor bullish technical
picture even with the choppy non-trending pattern.
|
There is a renewed interest in the style of trading that's best described as making huge, concentrated bets by analyzing fundamental business conditions for BEST NCDEX Tips.
ReplyDelete