Executive Rate Market Report

http://globalhomefinance.com

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.

http://globalhomefinance.blogspot.com