Tuesday, December 21, 2010
Starting today as it did yesterday, the 10 yr note at 9:00 up 8/32, mortgages +2/32 (.06 bp) frm yesterday’s closes. Yesterday morning the mortgage markets showed nice price gains until about 2:00 when prices backed off and lenders re-priced lower; by the end of the day mortgage prices and all treasury prices across the curve were unchanged from last Friday. Year end market noise, as we noted trading from now until the end of the year will be on very thin volume contributing to wide swings at times.
At 9:30 the DJIA opened +30; the 10 yr note +5/32 3.32% -2 bp and mortgage prices +3/32 (.09 bp) frm yesterday’s close.
Today like yesterday, no economic data and no speeches from Fed officials. Markets will likely not change much by the time the day ends. The stock market opened better but like the rate markets equities will likely end relatively close to yesterday’s close. In order to see any significant moves the markets will need fresh news, so far there really isn’t anything new to chew on.
Tomorrow the final read on Q3 GDP is expected to increase to +2.8% growth from 2.5% reported in the advance data last month. Also tomorrow Nov existing home sales are expected to have increased 6.8% to 4.75 mil units annualized frm Oct’s decline of 2.2%, a solid increase if it actually occurs and another evidential data point suggesting a better economic outlook. It matters little that housing is in recession and there isn’t much help coming next year, what matters to markets is that it is better. The outlook for 2011 hasn’t changed, the year is widely expected to show more growth. The outlook for interest rates is for somewhat higher rates as long as the optimism continues.