Tuesday, July 3, 2012

Market Snapshot

Weekly Preview
Forwarded exclusively by:
Bob Rosenbaum
Access National Mortgage
Office: (703) 879-5200
Email: RRosenbaum@AccessNational.com
website: www.MyTalentedLender.com
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Tuesday, July 03, 2012

Treasuries and mortgages opened a little weaker this morning after the 10 yr and the MBS markets both tested their best levels in the last month yesterday. The very tight trading range that has been holding markets in check for the past month continues. The early trading in stock index futures was a little better but not much.

Not a lot of fresh news to be concerned with today. Europe is still in the headlights but after the summit meeting last week there has been some quiet out of the region. Europe’s leaders bought a little bit of time in staving off a euro-area breakup after last week’s summit even as the region remains a long way from stabilization. At the summit there was agreement to loosen bailout rules, lay the foundations for a banking union and break the link between sovereign and banking debt through the direct recapitalization of lenders. After the meeting the US bond market saw less buying as a safety trade that has been a key reason US long term rates are so low. It is likely that the current pause in the crisis won’t last long though; Germany was pushed into the position of going along with other leaders in the euro region but it isn’t likely this will end well and without continued disagreements over austerity and possible stimulus incentives.

The purchasing managers’ index in China rose to a three-month high of 56.7 in June from 55.2 in May. The result may be a sign that growth in the world’s second-largest economy may steady after leaders stepped up stimulus to counter a slowdown and maintained property curbs aimed at lowering home prices. The government cut interest rates last month for the first time since 2008 and has reduced banks’ reserve requirements three times since November. On Sunday China’s official manufacturing PMI in June was 50.2, signaling a slower expansion for a second month, according to a separate report. In the US the June ISM services sector index will be released on Thursday.

At 9:30 the DJIA opened -12, NASDAQ +0.16; the 10 yr note 1.60% +1 bp and mortgage prices unchanged from yesterday’s closes.

Thursday the ECB meets with some thinking the bank will lower interest rates. Crude oil is headed higher today as supplies decline with the Iran embargo.

At 10:00 May factory orders, the only data today, was better than expected; +0.7% with markets looking for +0.4%. The stock indexes gained a little on the better orders but trade is slow and will likely remain thatr way. The stock market will close at 1:00 this afternoon and the bond and mortgage markets close at 2:00 pm.

Both the 10 yr note and 30 yr MBSs continue to find support at their 20 day averages and remain in their tight ranges. We don’t want to call this a bull market in the bond market anymore; the reality is it is neutral. Unable to establish any trend over the last month; traders are taking advantage of buying on dips on prices, selling on rallies as long as the tight range continues. Friday the June employment report is due with general expectations that it will be a weak one; when it comes to employment reports talk is just that, the report is usually a surprise one way or the other. Given the recent data confirming a slowdown the report shouldn’t be a surprise on more jobs,

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